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Consumer Information, Product Quality, and Seller Reputation

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Author Info
Carl Shapiro

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Abstract

This article analyzes markets in which consumers are imperfectly informed about product quality. An important force that prevents deterioration of the quality supplied by sellers is the formation of firm-specific reputations. It is shown in general that reputations, because they can reward high quality production only with a lag, can work only imperfectly. Viewing reputation as an expectation of quality, this article studies the properties of quality expectations that are fulfilled. When sellers set quality once and for all, any self-fulfilling quality level must lie below the perfect information quality level. The same is true of steady-state quality levels when sellers can vary quality over time. Finally, the relationship between consumer information and product quality is explored.

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Publisher Info
Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 13 (1982)
Issue (Month): 1 (Spring)
Pages: 20-35
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:rje:bellje:v:13:y:1982:i:spring:p:20-35

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  1. Bruce I. Carlin & Simon Gervais, 2009. "Legal Protection in Retail Financial Markets," NBER Working Papers 14972, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Bramley, C. & Kirsten, J.F., 2007. "Exploring the Economic Rationale for Protecting Geographical Indicators in Agriculture," Agrekon, Agricultural Economics Association of South Africa (AEASA), vol. 46(1), March. [Downloadable!]
  3. Thomas Liebi, 2002. "Trusting Labels: A Matter of Numbers?," Diskussionsschriften dp0201, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
  4. Palmer, Karen & Walls, Margaret, 1999. "Extended Product Responsibility: An Economic Assessment of Alternative Policies," Discussion Papers dp-99-12, Resources For the Future. [Downloadable!]
  5. Gene M. Grossman & Carl Shapiro, 1988. "Counterfeit-Product Trade," NBER Working Papers 1876, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Mark Israel, 2005. "Services as Experience Goods: An Empirical Examination of Consumer Learning in Automobile Insurance," American Economic Review, American Economic Association, vol. 95(5), pages 1444-1463, December. [Downloadable!]
  7. Auriol, Emmanuelle & Schilizzi, Steven, 2003. "Quality Signaling through Certification. Theory and an Application to Agricultural Seed Market," IDEI Working Papers 165, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
  8. Carol J. Simon, 1989. "The Role of Reputation in the Market for Initial Public Offerings," UCLA Economics Working Papers 569, UCLA Department of Economics. [Downloadable!]
  9. James D. Dana, 2000. "Competition in Price and Availability when Availability is Unobservable," Econometric Society World Congress 2000 Contributed Papers 1450, Econometric Society. [Downloadable!]
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  10. Miller, Nolan & Resnick, Paul & Zeckhauser, Richard, 2002. "Eliciting Honest Feedback in Electronic Markets," Working Paper Series rwp02-039, Harvard University, John F. Kennedy School of Government. [Downloadable!]
  11. Martin Gaynor & Deborah Haas-Wilson & William B. Vogt, 1998. "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second Best in Health Care Markets," NBER Working Papers 6865, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. repec:bep:buspol:4:2002:3:245-274 is not listed on IDEAS
  13. Darius Lakdawalla & Tomas Philipson & Y. Richard Wang, 2006. "Intellectual Property and Marketing," NBER Working Papers 12577, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Betancor, Ofelia & Rendeiro, Robert, 1999. "Regulating privatized infrastructures and airport services," Policy Research Working Paper Series 2180, The World Bank. [Downloadable!]
  15. Pierre Fleckinger, 2007. "Collective Reputation and Market Structure: Regulating the Quality vs Quantity Trade-of," Working Papers hal-00243080_v1, HAL. [Downloadable!]
  16. Fishman, Arthur & Finkelshtain, Israel & Simhon, Avi & Yacouel, Nira, 2008. "The Economics of Collective Brands," Discussion Papers 46056, Hebrew University of Jerusalem, Department of Agricultural Economics and Management. [Downloadable!]
  17. repec:bep:eapadv:v:6:y:2006:i:1:p:1322-1322 is not listed on IDEAS
  18. Carsten Fink & Javorcik,Beata & Mariana Spatareanu, 2003. "Income-related biases in international trade : what do trademark registration data tell us?," Policy Research Working Paper Series 3150, The World Bank. [Downloadable!]
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  19. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June. [Downloadable!]
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  20. Michael Waldman, 1984. "The Role of Integrity in Economic Interaction," UCLA Economics Working Papers 350, UCLA Department of Economics. [Downloadable!]
  21. Carlton, Dennis W. & Perloff, Jeffrey M., 1989. "The Economics of Information," Research Reports 25156, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
  22. Carol J. Simon, 1986. "Investor Information and the Performance of New Issues," UCLA Economics Working Papers 413, UCLA Department of Economics. [Downloadable!]
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