Imperfect certification in a Bertrand duopoly

Lucie Bottega and Jenny De Freitas

Economics Letters, 2019, vol. 178, issue C, 33-36

Abstract: A label that imperfectly signals product quality is analyzed in a Bertrand duopoly with differentiated products. Considering strategic firms when certification is imperfect has some important implications. A separating equilibrium can be sustained with a free test due to price strategic complementarity. When the certifier’s objective is welfare, and the test cost is sufficiently small, the most appropriate test is that which is subject to a low rate of false negatives.

Keywords: Asymmetric information; Quality certification; Imperfect test; Labeling; Bertrand duopoly; Separating equilibrium (search for similar items in EconPapers)
JEL-codes: C72 D43 D60 D82 L15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:178:y:2019:i:c:p:33-36

DOI: 10.1016/j.econlet.2019.02.014

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