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Trusting Labels: A Matter of Numbers?

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Author Info
Thomas Liebi
Abstract

Labelling is an increasingly popular way to deal with the problem of non-observability of quality inherent in the consumption of credence goods. I present a model in which the number of labelled products a monopolist offers serves as a signal for the non-observable endogenous quality. An increase in the number of labelled products increases the risk of losing consumer trust by increasing the possibility of detecting wrong labels. This lowers the incentive to produce low quality in the first place.

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Paper provided by Universitaet Bern, Departement Volkswirtschaft in its series Diskussionsschriften with number dp0201.

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Date of creation: Feb 2002
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Handle: RePEc:ube:dpvwib:dp0201

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Related research
Keywords: credence goods; labels; product quality; consumer trust;

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Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Choi, Jay Pil, 1998. "Brand Extension as Informational Leverage," Review of Economic Studies, Blackwell Publishing, vol. 65(4), pages 655-69, October. [Downloadable!] (restricted)
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  2. Winand Emons, 1994. "Credence Goods and Fraudulent Experts," Diskussionsschriften dp9402, Universitaet Bern, Departement Volkswirtschaft.
    Other versions:
  3. Cabral, L.M.B., 2000. "Stretching Firm and Brand Reputation," New York University, Leonard N. Stern School Finance Department Working Paper Seires 00-07, New York University, Leonard N. Stern School of Business-.
    Other versions:
  4. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
  5. Emons, Winand, 2001. "Credence goods monopolists," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 375-389, March. [Downloadable!] (restricted)
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  6. Carl Shapiro, 1982. "Consumer Information, Product Quality, and Seller Reputation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 20-35, Spring. [Downloadable!] (restricted)
  7. Uwe Dulleck & Rudolf Kerschbamer, 2001. "On Doctors, Mechanics and Computer Specialists Or Where are the Problems with Credence Goods?," Vienna Economics Papers 0101, University of Vienna, Department of Economics. [Downloadable!]
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  8. Sullivan, Mary, 1990. "Measuring Image Spillovers in Umbrella-Branded Products," Journal of Business, University of Chicago Press, vol. 63(3), pages 309-29, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Thomas Liebi, 2002. "Monitoring Eco-Labels: You Can Have Too Much of a Good Thing," Diskussionsschriften dp0207, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
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