Attribute dependence and the provision of quality
AbstractA quality improvement often necessitates modifications of varietal product features. This paper studies firmsâ incentives to provide quality when this decision affects the goodsâ degree of horizontal differentiation. Intuitively, one is inclined to argue that private incentives to provide quality are insufficient relative to the social optimum if a quality improvement reduces horizontal differentiation. We find that this argument depends on whether the game is simultaneous or sequential. In the former case private incentives prove excessive relative to the social optimum, and in the latter case, insufficient. As a result, a regulator might want to impose either minimum or maximum quality standards.
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Bibliographic InfoArticle provided by Elsevier in its journal Regional Science and Urban Economics.
Volume (Year): 31 (2001)
Issue (Month): 5 (September)
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Other versions of this item:
- Degryse, H.A. & Irmen, A., 1997. "Attribute dependence and the provision of quality," Discussion Paper 1997-18, Tilburg University, Center for Economic Research.
- Degryse, Hans & Irmen, Andreas, 1997. "Attribute Dependence and the Provision of Quality," CEPR Discussion Papers 1635, C.E.P.R. Discussion Papers.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
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