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Public Report, Price, and Quality

  • Ching-to Albert MA

    ()

    (Department of Economics, Boston University.)

  • Henry Y. Mak

    ()

    (Department of Economics, European University Institute)

A monopolist produces a good with two qualities. All consumers have the same valuation of the first quality, but their valuations of the second vary, and are their private information. A public agency can verify qualities, and make credible reports to consumers. In Full Quality Report, the public agency reports both qualities. In Average Quality Report, it reports a weighted average of qualities. The equilibrium qualities in Full Quality Report can be implemented by Average Quality Report. Equilibrium qualities in Average Quality Report give higher consumer surplus than Full Quality Report. Bertrand competition under Average Quality Report yields first-best qualities.

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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - Working Papers Series with number WP2011-023.

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Length: 30 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:bos:wpaper:wp2011-023
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Web page: http://www.bu.edu/econ/

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  1. Heski Bar‐Isaac & Guillermo Caruana & Vicente Cuñat, 2012. "Information Gathering Externalities for a Multi‐Attribute Good," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 162-185, 03.
  2. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January.
  3. Glazer, Jacob & McGuire, Thomas G. & Cao, Zhun & Zaslavsky, Alan, 2008. "Using global ratings of health plans to improve the quality of health care," Journal of Health Economics, Elsevier, vol. 27(5), pages 1182-1195, September.
  4. Glazer, Jacob & McGuire, Thomas G., 2006. "Optimal quality reporting in markets for health plans," Journal of Health Economics, Elsevier, vol. 25(2), pages 295-310, March.
  5. Monic Sun, 2011. "Disclosing Multiple Product Attributes," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 20(1), pages 195-224, 03.
  6. Edward E. Schlee, 1996. "The Value of Information About Product Quality," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 803-815, Winter.
  7. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
  8. Glazer Jacob & McGuire Thomas & Normand Sharon-Lise T., 2008. "Mitigating the Problem of Unmeasured Outcomes in Quality Reports," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(2), pages 1-18, July.
  9. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
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