The Gains of Standardization from Reduced Search Costs

Philip Jones and John Hudson
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Philip Jones: School of Social Sciences, University of Bath, Claverton Down, Bath, United Kingdom

Homo Oeconomicus, 1997, vol. 14, 331-346

Abstract: This paper analyses the impact of standardization on welfare of consumers who rely on signals as indicators of product quality. a variance reduction approach suggests that, after standardization, consumers will choose to rely on fewer signals in their evaluation of product quality. the optimal level of standardization is analysed and it is argued that voluntary schemes based on self-interest are unlikely to set this optimum. A test of the proposition that standardization reduces transactions costs is based on a comparison of the number of signals used before and after standardization.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:hom:homoec:v:14:y:1997:p:331-346

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