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Bonding and Nonbonding Signals of Product Quality

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Author Info
Ippolito, Pauline M
Abstract

This article examines the essential role of bonding in most signaling models where quality is subject to moral hazard problems. An advertising model, in which advertising is a durable asset whose value is reduced by cheating, illustrates how the bonding capacity of a signal determines its cost. Characteristics of the market that govern how well a signal is targeted to relevant consumers and how information about cheating is spread are critical to determining bonding capacity and, hence, to the choice among potential signals. This bonding perspective explains the literature's widely divergent predictions about the conditions necessary for quality signals. Copyright 1990 by the University of Chicago.

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File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/00219398/.61-.67
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 63 (1990)
Issue (Month): 1 (January)
Pages: 41-60
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Handle: RePEc:ucp:jnlbus:v:63:y:1990:i:1:p:41-60

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  1. Michael J. Barone & Thomas E. DeCarlo, 2003. "Emerging Forms of Competitive Advantage: Implications for Agricultural Producers," Center for Agricultural and Rural Development (CARD) Publications 03-mrp5, Center for Agricultural and Rural Development (CARD) at Iowa State University. [Downloadable!]
  2. Lee, Boon-Chye & Ang, Lawrence & Dubelaar, Chris, 2004. "Lemons on the Web: A Signalling Approach to the Problem of Trust in Internet Commerce," Economics Working Papers wp04-10, School of Economics, University of Wollongong, NSW, Australia. [Downloadable!]
  3. Michael J. Barone & Thomas E. DeCarlo, 2003. "Emerging Forms of Competitive Advantage: Implications for Agricultural Producers," Midwest Agribusiness Trade Research and Information Center (MATRIC) Publications 03-mrp5, Midwest Agribusiness Trade Research and Information Center (MATRIC) at Iowa State University. [Downloadable!]
  4. Schulze, Holger & Albersmeier, Friederike & Spiller, Achim & Jahn, Gabriele, 2006. "Audit risk factors in certification: How can risk-oriented audits improve the quality of certification standards?," 98th Seminar, June 29-July 2, 2006, Chania, Crete, Greece 10108, European Association of Agricultural Economists. [Downloadable!]
  5. Martina Eckardt, 2007. "Does Signaling Work in Markets for Information Services? An Empirical Investigation for Insurance Intermediaries in Germany," Thuenen-Series of Applied Economic Theory 77, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  6. Gergaud, Olivier & Livat, Florine, 2007. "How do consumers use signals to assess quality?," Working Papers 37296, American Association of Wine Economists. [Downloadable!]
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