Credence attributes, voluntary organizations, and social pressure

Credence attributes of products are unobservable through search or experience. Some consumers are willing to pay a premium for their provision, and in addition, citizens can apply social pressure on firms to supply credence attributes. Firms have formed voluntary organizations to assure the provision of credence attributes, and the credible provision provides product differentiation. This paper provides a theory of the voluntary provision of credence attributes in the presence of demand pull from consumers and social pressure from NGOs, where an organization chooses a credence standard and firms compete given the standard. The credence standard is lower the larger the organization, and social pressure results in a higher standard.

► Credence attributes are supplied as a result of the demand pull from consumers and the push from social pressure by citizens. ► Firms have an incentive to form an organization to assure consumers that credence attributes of products are being provided. ► Rents are necessary for the supply of credence attributes, and larger credence organizations choose lower credence standards. ► Social pressure resulting from a contest between an NGO and the firms in the credence organization results in a higher credence standard.