Public Report, Price, and Quality
Ching-to Ma () and
Henry Mak ()
No WP2011-023, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics
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.
Keywords: Public report; price; quality; quality index (search for similar items in EconPapers)
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Journal Article: Public Report, Price, and Quality (2014)
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