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.
1965–2010.https://www.jstor.org/stable/26550518 Hector Chade and Lones Smith
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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.