Separating Equilibria with Imperfect Certification

Viscusi (1978) shows how, in markets with quality uncertainty, perfect certification results in separation from top down due to an unraveling process similar to Akerlof (1970). De and Nabar (1991) argue that imperfect certification prevents unraveling so that equilibria with full separation do not exist. This note shows that, if one considers the buyers' buying decision explicitly, a separating equilibrium with imperfect certification does exist.

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Year of publication:	2010
Authors:	Strausz, Roland
Publisher:	München : Sonderforschungsbereich/Transregio 15 - Governance and the Efficiency of Economic Systems (GESY)
Subject:	Standardisierung \| Adverse Selektion \| Konsumentenverhalten \| Gleichgewicht \| Theorie \| certification \| unraveling \| separating equilibrium

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Series:	SFB/TR 15 Discussion Paper ; 324
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.5282/ubm/epub.13230 [DOI] 631369104 [GVK] hdl:10419/93987 [Handle] RePEc:trf:wpaper:324 [RePEc]
Classification:	D82 - Asymmetric and Private Information ; L15 - Information and Product Quality; Standardization and Compatibility
Source:	EconStor

Persistent link: https://www.econbiz.de/10010333964