Abstract

This paper analyses the impact of standardization on the welfare of consumers who rely on signals as indicators of product quality. A variance reduction approach is developed in order to analyse the optimal use of signals in the evaluation of product quality. It is argued that standardization reduces the costs of uncertainty associated with assessing product quality. Cost savings are reflected in the reduction of time and effort which consumers spend on search. Consumers rely on fewer signals in their evaluation of product quality as a consequence of standardization.

If you find any errors or broken links, please email us at [email protected].