Caught in a Stranglehold? Advertising: What Else?

I analyze a quality signaling problem by a monopoly introducing a new experience good. A high‐quality type aims to signal itself to consumers but can be imitated by a low‐quality type with either a low or a high cost. In the unique separating equilibrium after deletion of dominated strategies, the high‐quality type separates through a marketing mix of price and dissipative advertising. Advertising is used despite the absence of repeat purchases or informed consumers.