Research Article
A Quality Certification Signaling Game between Parts Suppliers and Producers under Incomplete Information
Published: January 2007 · Vol. 36, No. 4 · pp. 925-938
Full Text
Abstract
This study modeled a signaling game through quality certification by component suppliers in situations where quality information about components is asymmetric between the supplier and the producer who procures components to manufacture finished goods. When component suppliers are classified into types that produce high-quality components and types that produce low-quality components, and when their type constitutes private information, the uninformed producer must make all decisions based on the average defect rate in the component market, resulting in inefficiency inherent to markets with incomplete information. This paper demonstrates that while suppliers producing low-quality components fail to obtain quality certification, suppliers producing high-quality components can acquire quality certification from an accredited certification body as an action signaling their type, and this can be established as a perfect Bayesian separating equilibrium, thereby enabling the uninformed producer to recognize their type and inducing efficient decision-making as in a complete information market.
