The Demand for Tests
Many consumption goods have inherent attributes that are unknown to both consumers and producers of the good. This is reflected for example by the current discussion about potential harms of food products containing genetically modified organisms. The underlying paper analyzes consumers' demand for product tests in a surrounding of symmetric but imperfect information. It is shown that the demand for information of existing customers is higher than that of potential new ones. In addition, the introduction of an information market unambiguously lowers the product price. This is true, even though expected positive or negative quality news is symmetric in terms of monetary valuation.
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- Bester, Helmut & Ritzberger, Klaus, 2001.
"Strategic pricing, signalling, and costly information acquisition,"
International Journal of Industrial Organization,
Elsevier, vol. 19(9), pages 1347-1361, November.
- Helmut Bester & Klaus Ritzberger, "undated". "Strategic Pricing, Signalling, and Costly Information Acquisition," Papers 008, Departmental Working Papers.
- Bester, Helmut & Ritzberger, Klaus, 1998. "Strategic Pricing, Signalling and Costly Information Acquisition," CEPR Discussion Papers 2032, C.E.P.R. Discussion Papers.
- Grossman, Sanford J & Stiglitz, Joseph E, 1980.
"On the Impossibility of Informationally Efficient Markets,"
American Economic Review,
American Economic Association, vol. 70(3), pages 393-408, June.
- Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
- Russell Cooper & Thomas W. Ross, 1984.
"Monopoly Provision of Product Quality with Uninformed Buyers,"
Cowles Foundation Discussion Papers
688R, Cowles Foundation for Research in Economics, Yale University, revised Nov 1984.
- Cooper, Russell & Ross, Thomas W., 1985. "Monopoly provision of product quality with uninformed buyers," International Journal of Industrial Organization, Elsevier, vol. 3(4), pages 439-449, December.
- Thomas Liebi, 2002. "Monitoring Eco-Labels: You Can Have Too Much of a Good Thing," Diskussionsschriften dp0207, Universitaet Bern, Departement Volkswirtschaft.
- Michael H. Riordan, 1986. "Monopolistic Competition with Experience Goods," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 265-279.
- Jones, Philip & Hudson, John, 1996. "Signalling product quality: When is price relevant?," Journal of Economic Behavior & Organization, Elsevier, vol. 30(2), pages 257-266, August.
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