Quality Contingent Pricing Under Asymmetric Information in Electronic Markets

This paper gives a model of optimal n-part Quality Contingent Pricing (QCP), which could be changed into that of 2-part QCP further through transform of decision structure. Based on the 2-part QCP model, the proper application conditions of QCP are discussed. Furthermore, this paper analyzes the strategies of optimal price and optimal discount level for a given quality threshold, and optimal quality threshold in 2-part QCP. According to the conclusions of this paper, an instructive guideline for the firms in the formulation of pricing strategies in Electronic Market is provided.