Can high prices ensure product quality when buyers do not know the sellers' cost?

The 1981 Klein-Leffler model of product quality does not explain why high-q uality firms would dissipate the rents they earn fi-om quality-assuring pri ce premia, and it relies on consumers knowing the cost functions of firms. In the present article, consumers do not know any firm's cost of producing quality goods, so firms with a low cost of producing high quality engage in conspicuous spending to demonstrate they earn a profitable mark-up over co st. Complete rent dissipation does occur if such firms have the same cost o f producing low-quality items as other firms that are worse at producing hi gh quality.