Consumer confusion and multiple equilibria
This paper focuses on consumer confusion when firms may choose between credible and non-credible certification systems for signalling quality. It is shown that the presence of confused consumers leads to the emergence of multiple stable equilibria, in which either all firms select the credible certification or all firms select the non-credible certification. A situation with numerous confused consumers is characterized by the complete absence of credible certification.
Volume (Year): 30 (2010)
Issue (Month): 2 ()
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0510, University of Crete, Department of Economics.
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- P. Garella & P. Petrakis, 2004. "Minimum Quality Standards and Consumers Information," Working Papers 532, Dipartimento Scienze Economiche, Universita' di Bologna.
- Albano, Gian Luigi & Lizzeri, Alessandro, 2001. "Strategic Certification and Provision of Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 267-83, February.
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- Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
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