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Reputation and Production Standards

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Author Info

  • McCluskey, Jill J.
  • Loureiro, Maria L.

Abstract

This paper analyzes a monopolist's behavior when consumers cannot observe the production standards. These types of products are usually known as credence goods. The steady-state level of quality with credence goods is found to be lower than that with experience goods, and perfect information goods. The finding that only perceived quality, which is effectively a filtered version of true quality, affects reputation indicates rewards for high quality production are lower in the credence good case. Further, an increase in the level of monitoring can increase the true level of product quality in the market for credence goods.

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File URL: http://purl.umn.edu/30788
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 30 (2005)
Issue (Month): 01 (April)
Pages:

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Handle: RePEc:ags:jlaare:30788

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Web page: http://waeaonline.org/
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Related research

Keywords: credence goods; production standards; reputation; Production Economics;

References

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  1. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
  2. Doughety, Andrew F & Reinganum, Jennifer F, 1997. "Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 13(2), pages 410-32, October.
  3. McCluskey, Jill J., 1999. "A Game Theoretic Approach to Organic Foods: An Analysis of Asymmetric Information and Policy," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia, Australian Agricultural and Resource Economics Society 123706, Australian Agricultural and Resource Economics Society.
  4. Noe, Thomas H. & Rebello, Michael J., 1995. "Consumer activism, producer groups, and production standards," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 69-85, June.
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Citations

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Cited by:
  1. Dai, Yunhao & Kong, Dongmin & Wang, Maobin, 2013. "Investor reactions to food safety incidents: Evidence from the Chinese milk industry2We thank Colin Poulton (Managing Editor), two anonymous referees, Martin Qiu, Shasha Liu, and Yan Sheng for helpful," Food Policy, Elsevier, Elsevier, vol. 43(C), pages 23-31.
  2. Pozo, Veronica F. & Saak, Alexander E. & Hanawa-Peterson, Hikaru, 2009. "Product Origin and Reputation for Quality: the Case of Organic Foods," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin, Agricultural and Applied Economics Association 49503, Agricultural and Applied Economics Association.
  3. Grolleau, Gilles & Caswell, Julie A., 2006. "Interaction Between Food Attributes in Markets: The Case of Environmental Labeling," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, Western Agricultural Economics Association, vol. 31(03), December.
  4. Galloway, Kristin & Bailey, DeeVon, 2005. "A Rose by Another Name: An Objective Analysis of an Established Market for Credence Attributes," 2005 Annual meeting, July 24-27, Providence, RI 19493, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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