Moral hazard, vertical integration, and public monitoring in credence goods

Abstract

Moral hazard is a problem in markets where the qualities or characteristics of products cannot be verified with certainty by consumers. Here we demonstrate that vertical integration is one possible way of dealing with such problems. When the saving of monitoring costs is the driving force behind vertical integration, public monitoring freely available to the market may prevent vertical integration.

Keywords

credence goods; moral hazard; vertical integration

Published in

European Review of Agricultural Economics
2002, Volume: 29, number: 2, pages: 271-279

SLU Authors

• Karantininis, Konstantinos

  • Department of Economics, Swedish University of Agricultural Sciences
    

UKÄ Subject classification

Economics


Publication identifier

DOI: https://doi.org/10.1093/eurrag/29.2.271

Permanent link to this page (URI)

https://res.slu.se/id/publ/100271