Public Report, Price, and Quality
AbstractA monopolist produces a good with two qualities. All consumers have the same valuation of the first quality, but their valuations of the second vary, and are their private information. A public agency can verify qualities, and make credible reports to consumers. In Full Quality Report, the public agency reports both qualities. In Average Quality Report, it reports a weighted average of qualities. The equilibrium qualities in Full Quality Report can be implemented by Average Quality Report. Equilibrium qualities in Average Quality Report give higher consumer surplus than Full Quality Report. Bertrand competition under Average Quality Report yields first-best qualities.
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Bibliographic InfoPaper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-023.
Length: 30 pages
Date of creation: Jan 2011
Date of revision:
Public report; price; quality; quality index;
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