Competition vs. quality in an industry with imperfect traceability
AbstractWe consider an industry where firms produce goods that have different quality levels but firms cannot differentiate themselves from rivals. In this situation, producing low-quality generates a negative externality on the whole industry. This is particularly true when consumers cannot identify producers. In this article, we show that under a "Laissez Faire" situation free entry is not socially optimal and we argue that the imposition of a Minimum Quality Standard (MQS) may induce firms to enter the market.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 31 (2011)
Issue (Month): 4 ()
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Entry; Externality; Minimum Quality Standard; Quality.;
Other versions of this item:
- Rouviere, Elodie & Soubeyran, Raphael, 2010. "Competition Vs. Quality In An Industry With Imperfect Traceability," 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany 116407, European Association of Agricultural Economists.
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
- L5 - Industrial Organization - - Regulation and Industrial Policy
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