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A Note on "Lemons" Markets with Quality Certification

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  • W. Kip Viscusi

Abstract

In markets with qualitative uncertainty, pricing on the basis of average quality will be unattractive to participants whose products are above average in quality. This note examines the possibility of quality certification as an alternative to exit from the market in such situations. Examples dealing with labor market uncertainties illustrate the economic properties of the quality certification process, which unravels from the top down. The economic motivations and patterns of this form of price discrimination are similar to those encountered in standard "lemons" models.

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Bibliographic Info

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

Volume (Year): 9 (1978)
Issue (Month): 1 (Spring)
Pages: 277-279

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Handle: RePEc:rje:bellje:v:9:y:1978:i:spring:p:277-279

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Cited by:
  1. Andrew F. Daughety & Jennifer F. Reinganum, 2006. "Products Liability, Signaling and Disclosure," Vanderbilt University Department of Economics Working Papers 0625, Vanderbilt University Department of Economics.
  2. Wayne L. Lee & Anjan V. Thakor & Gautam Vora, 2004. "Screening, Market Signalling, and Capital Structure Theory," Finance 0411023, EconWPA.
  3. Andrew F. Daughety & Jennifer F. Reinganum, 2008. "Communicating quality: a unified model of disclosure and signalling," RAND Journal of Economics, RAND Corporation, vol. 39(4), pages 973-989.
  4. Corts, Kenneth S., 2014. "The social value of information on product quality," Economics Letters, Elsevier, vol. 122(2), pages 140-143.
  5. Tong Wang & David A. Hennessy, 2012. "Modeling Interdependent Participation Incentives: Dynamics of a Voluntary Livestock Disease Control Program," Center for Agricultural and Rural Development (CARD) Publications 12-wp527, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  6. Vincze, János, 2010. "Miért és mitől védjük a fogyasztókat?. Aszimmetrikus információ és/vagy korlátozott racionalitás
    [Asymmetric information and/or bounded rationality: why are consumers protected and from
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 725-752.
  7. Muhtaseb, Majed R. & Philippatos, George C., 1995. "Shareholder wealth effects of common stock offerings," Global Finance Journal, Elsevier, vol. 6(2), pages 175-193.
  8. McGuire, Stephen J. & Dilts, David M., 2008. "The financial impact of standard stringency: An event study of successive generations of the ISO 9000 standard," International Journal of Production Economics, Elsevier, vol. 113(1), pages 3-22, May.
  9. Karsten Mause, 2010. "Considering Market-Based Instruments for Consumer Protection in Higher Education," Journal of Consumer Policy, Springer, vol. 33(1), pages 29-53, March.
  10. Alexander, Cindy R. & Bauguess, Scott W. & Bernile, Gennaro & Lee, Yoon-Ho Alex & Marietta-Westberg, Jennifer, 2013. "Economic effects of SOX Section 404 compliance: A corporate insider perspective," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 267-290.
  11. Rick Harbaugh & John W. Maxwell & Beatrice Roussillon, 2006. "The Groucho Effect of Uncertain Standards," Working Papers 2006-09, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  12. Gomez, Emilio Galdeano & Lorente, Jose Cespedes & Rodriguez, Manuel Rodriguez, 2002. "Environmental and Quality Improvement Practices: Their Analysis as Components of the Value Added in Horticultural Firms," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24870, European Association of Agricultural Economists.
  13. Dziuda, Wioletta, 2011. "Strategic argumentation," Journal of Economic Theory, Elsevier, vol. 146(4), pages 1362-1397, July.

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