Higher-quality firms offer larger inspection subsidies in equilibrium, producing a unique forward-induction outcome where low-quality firms are never inspected, intermediate firms separate, and high-quality firms pool at full subsidy.
arXiv:2103.03769 [cs.GT]https://arxiv.org/abs/2103.03769 Benjamin Edelman, Michael Ostrovsky, and Michael Schwarz
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Subsidizing Sequential Search
Higher-quality firms offer larger inspection subsidies in equilibrium, producing a unique forward-induction outcome where low-quality firms are never inspected, intermediate firms separate, and high-quality firms pool at full subsidy.