Abstract
Several empirical studies show that mutual funds set their prices in a strategic way according to their level of quality. In a market where two mutual funds are vertically differentiated, we study their price strategies in cases of perfect information and when investors are unable to distinguish the type of fund. Our results show that mutual funds prefer to set their price sequentially and that they are indifferent to be the first or the second mover. Additionally, the presence of a lower quality mutual fund compels both mutual funds to set lower prices for low levels quality differences between them.
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