Can Quality Certification Lead to Stable Cartels?

Can Quality Certification Lead to Stable Cartels? Cartel stability is investigated in a context of adverse selection whereconsumers are imperfectly informed about product quality. Producer collusionmay be necessary to signal quality via third-party certification. Whileexamining different cost structures for third-party certification, we showthat a stable cartel that provides information about product quality mayimprove overall welfare even if producers collude to reduce competition. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Can Quality Certification Lead to Stable Cartels?

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2003 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/B:REIO.0000005595.35570.1a
Publisher site
See Article on Publisher Site

Abstract

Cartel stability is investigated in a context of adverse selection whereconsumers are imperfectly informed about product quality. Producer collusionmay be necessary to signal quality via third-party certification. Whileexamining different cost structures for third-party certification, we showthat a stable cartel that provides information about product quality mayimprove overall welfare even if producers collude to reduce competition.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 4, 2004

References

  • The Role of Common Labelling in a Context of Asymmetric Information
    Marette, S.; Crespi, J.; Schiavina, A.

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