1. What is the simple logic of warranties as a quality signal? What limits the attractiveness of warranties as a signal for high-quality firms?
2. Describe the basic moral hazard problem in the context of quality provision? How can reputation for high quality be sustained?
3. Why may the reputation mechanism break down under monopoly? Why can the reputation mechanism be reinforced by competition?
4. Why should consumers trust umbrella brands more than separate brands? Discuss the out-of-equilibrium behaviour of consumers.