òòò½Íø Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Dynamic Certification and Reputation for Quality
òòò½Íø Journal: Microeconomics
vol. 10,
no. 2, May 2018
(pp. 58–82)
Abstract
We study firm's incentives to build and maintain reputation for quality, when quality is persistent and can be certified at a cost. We characterize all reputation-dependent MPEs. They vary in frequency of certification and payoffs. Low payoffs arise in equilibria because of over-certification traps. We contrast the MPEs with the highest payoff equilibria. Industry certification standards can help firms coordinate on such good equilibria. The optimal equilibria allow firms to maintain high quality forever, once it is reached for the first time. They are either lenient or harsh, endowing firms with multiple or one chance to improve and certify quality.Citation
Marinovic, Iván, Andrzej Skrzypacz, and Felipe Varas. 2018. "Dynamic Certification and Reputation for Quality." òòò½Íø Journal: Microeconomics 10 (2): 58–82. DOI: 10.1257/mic.20160282Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- L13 Oligopoly and Other Imperfect Markets
- L15 Information and Product Quality; Standardization and Compatibility