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Consumer confusion and multiple equilibria

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  • Stéphan Marette

    ()
    (UMR Economie Publique INRA)

Abstract

This paper focuses on consumer confusion when firms may choose between credible and non-credible certification systems for signalling quality. It is shown that the presence of confused consumers leads to the emergence of multiple stable equilibria, in which either all firms select the credible certification or all firms select the non-credible certification. A situation with numerous confused consumers is characterized by the complete absence of credible certification.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P105.pdf
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Bibliographic Info

Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 2 ()
Pages: 1120-1128

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Handle: RePEc:ebl:ecbull:eb-09-00513

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Keywords: Quality; certification;

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  1. Charles Wilson, 1980. "The Nature of Equilibrium in Markets with Adverse Selection," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 108-130, Spring.
  2. Bonroy, O. & Constantatos, C., 2007. "On the use of labels in credence goods markets," Working Papers 200709, Grenoble Applied Economics Laboratory (GAEL).
  3. Albano, Gian Luigi & Lizzeri, Alessandro, 2001. "Strategic Certification and Provision of Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 267-83, February.
  4. Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2004. "Environmental quality competition and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 284-306, March.
  5. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
  6. Paolo Garella & Emmanuel Petrakis, 2008. "Minimum quality standards and consumers’ information," Economic Theory, Springer, vol. 36(2), pages 283-302, August.
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Cited by:
  1. Stephan Marette & Jutta Roosen & Sandrine Blanchemanche, 2011. "The Combination of lab and field experiments for benefit-cost analysis," Working Papers 40757, Institut National de la Recherche Agronomique, France.
  2. Marette, Stéphan & Millet, Guy, 2014. "Economic benefits from promoting linseed in the diet of dairy cows for reducing methane emissions and improving milk quality," Food Policy, Elsevier, vol. 46(C), pages 140-149.

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