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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- P. Garella & P. Petrakis, 2004.
"Minimum Quality Standards and ConsumersÕ Information,"
532, Dipartimento Scienze Economiche, Universita' di Bologna.
- Paolo Garella & Emmanuel Petrakis, 2008. "Minimum quality standards and consumers’ information," Economic Theory, Springer, vol. 36(2), pages 283-302, August.
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- Paolo Garella & Emmanuel Petrakis, 2005. "Minimum Quality Standards and Consumers Information," Working Papers 0510, University of Crete, Department of Economics.
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"On the use of labels in credence goods markets,"
200709, Grenoble Applied Economics Laboratory (GAEL).
- Alessandro Lizzeri, 1999. "Information Revelation and Certification Intermediaries," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 214-231, Summer.
- 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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