The Demand for Tests

Thomas Liebi

Diskussionsschriften from Universitaet Bern, Departement Volkswirtschaft

Abstract: Many consumption goods have inherent attributes that are unknown to both consumers and producers of the good. This is reflected for example by the current discussion about potential harms of food products containing genetically modified organisms. The underlying paper analyzes consumers' demand for product tests in a surrounding of symmetric but imperfect information. It is shown that the demand for information of existing customers is higher than that of potential new ones. In addition, the introduction of an information market unambiguously lowers the product price. This is true, even though expected positive or negative quality news is symmetric in terms of monetary valuation.

Keywords: tests; imperfect; quality information; product quality (search for similar items in EconPapers)
JEL-codes: D11 D82 L15 (search for similar items in EconPapers)
Date: 2003-05
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Persistent link: https://EconPapers.repec.org/RePEc:ube:dpvwib:dp0307

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