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Information And The Provision Of Quality Differentiated Products

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  • KEITH BROUHLE
  • MADHU KHANNA

Abstract

Governments often enact information provision policies to overcome asymmetric information of product qualities. We show that increasing awareness among consumers of the quality of a good can (but will not always) encourage firms to produce goods with higher levels of quality. Even if product qualities increase, social welfare may fall as information provision results in too much product differentiation. We show that the effectiveness of emission taxes and output subsidies are affected by the level of consumer knowledge of product quality, and we identify conditions under which information provision is welfare enhancing relative to these price instruments. (JEL L1 5, Q58)

Suggested Citation

  • Keith Brouhle & Madhu Khanna, 2007. "Information And The Provision Of Quality Differentiated Products," Economic Inquiry, Western Economic Association International, vol. 45(2), pages 377-394, April.
    • Handle: RePEc:bla:ecinqu:v:45:y:2007:i:2:p:377-394
    DOI: 10.1111/j.1465-7295.2006.00033.x
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    References listed on IDEAS

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    Cited by:

    1. Yi-Ling Cheng & Shin-Kun Peng, 2012. "Quality and Quantity Competition in a Multiproduct Duopoly," Southern Economic Journal, John Wiley & Sons, vol. 79(1), pages 180-202, July.
    2. Alberto Cavaliere & Giovanni Crea, 2017. "Vertical Differentiation With Optimistic Misperceptions And Information Disparities," DEM Working Papers Series 137, University of Pavia, Department of Economics and Management.
    3. Alberto Cavaliere & Giovanni Crea, 2016. "Vertical Differentiation With Consumers Misperceptions And Information Disparities," DEM Working Papers Series 122, University of Pavia, Department of Economics and Management.
    4. Ahmed, Rasha & Segerson, Kathleen, 2011. "Collective voluntary agreements to eliminate polluting products," Resource and Energy Economics, Elsevier, vol. 33(3), pages 572-588, September.
    5. Han, Bing & Chouinard, Hayley H., 2014. "Product quality, advertising intensity and market size," Economics Letters, Elsevier, vol. 124(2), pages 215-218.
    6. A. Cavaliere & G. Crea, 2022. "Brand premia driven by perceived vertical differentiation in markets with information disparity and optimistic consumers," Journal of Economics, Springer, vol. 135(3), pages 223-253, April.
    7. Matisoff, Daniel C., 2013. "Different rays of sunlight: Understanding information disclosure and carbon transparency," Energy Policy, Elsevier, vol. 55(C), pages 579-592.
    8. Ge, Jingfang & Adamowicz, Wiktor L. & Si, Wei, 2021. "Can environmental regulation achieve win-win growth in environmental and economic performance: evidence from the sugar industry under China’s mandatory environmental information disclosure policy," 2021 ASAE 10th International Conference (Virtual), January 11-13, Beijing, China 329398, Asian Society of Agricultural Economists (ASAE).
    9. Cheng, Yi-Ling, 2014. "Vertical product differentiation under demand uncertainty," Economic Modelling, Elsevier, vol. 36(C), pages 51-57.
    10. George Deltas & Donna Ramirez Harrington & Madhu Khanna, 2013. "Oligopolies with (Somewhat) Environmentally Conscious Consumers: Market Equilibrium and Regulatory Intervention," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(3), pages 640-667, September.
    11. Magali Delmas & Maria J. Montes‐Sancho & Jay P. Shimshack, 2010. "Information Disclosure Policies: Evidence From The Electricity Industry," Economic Inquiry, Western Economic Association International, vol. 48(2), pages 483-498, April.
    12. Christos Constantatos & Christos Pargianas & Eftichios S. Sartzetakis, 2021. "Green consumers and environmental policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(1), pages 105-140, February.
    13. Emiko Inoue, 2016. "Environmental disclosure and innovation activity: Evidence from EU corporations," Discussion papers e-16-012, Graduate School of Economics , Kyoto University.

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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