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Consumer confusion and multiple equilibria

  • Stéphan Marette

    ()

    (UMR Economie Publique INRA)

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.

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File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P105.pdf
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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 30 (2010)
Issue (Month): 2 ()
Pages: 1120-1128

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Handle: RePEc:ebl:ecbull:eb-09-00513
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  1. 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.
  2. P. Garella & P. Petrakis, 2004. "Minimum Quality Standards and ConsumersÕ Information," Working Papers 532, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
  4. Olivier Bonroy & Christos Constantatos, 2008. "On the use of labels in credence goods markets," Working Papers 20521, Institut National de la Recherche Agronomique, France.
  5. Amacher, Gregory S. & Koskela, Erkki & Ollikainen, Markku, 2004. "Environmental quality competition and eco-labeling," Journal of Environmental Economics and Management, Elsevier, vol. 47(2), pages 284-306, March.
  6. Charles Wilson, 1980. "The Nature of Equilibrium in Markets with Adverse Selection," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 108-130, Spring.
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