Trusting Labels: A Matter of Numbers?

Thomas Liebi

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: Labelling is an increasingly popular way to deal with the problem of non-observability of quality inherent in the consumption of credence goods. I present a model in which the number of labelled products a monopolist offers serves as a signal for the non-observable endogenous quality. An increase in the number of labelled products increases the risk of losing consumer trust by increasing the possibility of detecting wrong labels. This lowers the incentive to produce low quality in the first place.

Keywords: credence goods; labels; product quality; consumer trust (search for similar items in EconPapers)
JEL-codes: D82 L15 M37 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp0201

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