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Mathematical Problems in Engineering
Volume 2014, Article ID 159704, 7 pages
http://dx.doi.org/10.1155/2014/159704
Research Article

Certification of Credence Goods with Consideration of Consumers’ Learning Ability

1Jiangnan University, Wuxi 214122, China
2Guangdong University of Technology, Guangzhou 510006, China

Received 27 February 2014; Accepted 15 April 2014; Published 8 May 2014

Academic Editor: Efstratios Tzirtzilakis

Copyright © 2014 Xujin Pu et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

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.