Certification of Credence Goods with Consideration of Consumers’ Learning Ability

Abstract EN

The paper constructs a two-period and an infinitely repeated signaling model for the certification of credence goods, with consideration of the learning ability of consumers.

Based on the analysis of the existing conditions of separating equilibrium under different situations, results reveal that the certification cost has a significant influence on the separating equilibrium.

The range of certification cost for a separating equilibrium is positively related to the usurp cost and the consumers’ learning ability and is negatively related to the difference in the production cost.

Compared with that in a two-period model, the range of the certification cost for a separating equilibrium is greater in the infinitely repeated model and is positively related to the discount coefficient.