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Consumer confusion and multiple equilibria

Author

Listed:
  • Stéphan Marette

    () (UMR Economie Publique INRA)

Abstract

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.

Suggested Citation

  • Stéphan Marette, 2010. "Consumer confusion and multiple equilibria," Economics Bulletin, AccessEcon, vol. 30(2), pages 1120-1128.
  • Handle: RePEc:ebl:ecbull:eb-09-00513
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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P105.pdf
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    References listed on IDEAS

    as
    1. Paolo Garella & Emmanuel Petrakis, 2008. "Minimum quality standards and consumers’ information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 283-302.
    2. Olivier Bonroy & Christos Constantatos, 2008. "On the use of labels in credence goods markets," Journal of Regulatory Economics, Springer, vol. 33(3), pages 237-252, June.
    3. 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.
    4. Paolo Garella & Emmanuel Petrakis, 2008. "Minimum quality standards and consumers’ information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), pages 283-302.
    5. Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, pages 214-231.
    6. 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 267-283, February.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Marette, Stéphan & Roosen, Jutta & Blanchemanche, Sandrine, 2011. "The Combination of Lab and Field Experiments for Benefit-Cost Analysis," Journal of Benefit-Cost Analysis, Cambridge University Press, pages 1-36.
    2. Marette, Stéphan & Millet, Guy, 2014. "Economic benefits from promoting linseed in the diet of dairy cows for reducing methane emissions and improving milk quality," Food Policy, Elsevier, vol. 46(C), pages 140-149.
    3. Dorothée Brécard, 2017. "Consumer misperception of eco-labels, green market structure and welfare," Journal of Regulatory Economics, Springer, pages 340-364.

    More about this item

    Keywords

    Quality; certification;

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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