Reputation and Production Standards

This paper analyzes a monopolist's behavior when consumers cannot observe the production standards. These types of products are usually known as credence goods. The steady-state level of quality with credence goods is found to be lower than that with experience goods, and perfect information goods. The finding that only perceived quality, which is effectively a filtered version of true quality, affects reputation indicates rewards for high quality production are lower in the credence good case. Further, an increase in the level of monitoring can increase the true level of product quality in the market for credence goods.


Issue Date:
2005-04
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/30788
Published in:
Journal of Agricultural and Resource Economics, Volume 30, Number 1
Page range:
1-11
Total Pages:
11




 Record created 2017-04-01, last modified 2017-04-04

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