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Product Quality, Income Inequality And Market Structure

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  • Tanmoyee Chatterjee

    (Department of Economics, Shri Shikshayatan College)

  • Ajitava Raychaudhuri

    ()
    (Department of Economics, Jadavpur University)

Abstract

This paper analyses the effects of a change in distribution of income on quality choice made by firms producing search goods. It is assumed that willingness to pay for quality of consumers is an increasing function of income. Under the assumption that distribution of income is positively skewed, which is a common characteristic of developing countries, any redistribution of income will induce firms to improve their quality levels in duopoly and monopoly markets if redistribution makes consumers equally or unequally better off. On the other hand, quality levels will deteriorate if poverty is distributed more equally among consumers.

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Bibliographic Info

Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 29 (2004)
Issue (Month): 1 (June)
Pages: 51-84

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Handle: RePEc:jed:journl:v:29:y:2004:i:1:p:51-84

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Related research

Keywords: Product Quality; Income Inequality; Heterogeneous Preferences; Discriminating Monopolist; Two-Stage Duopoly Game;

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References

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  1. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Price competition, quality and income disparities," CORE Discussion Papers RP -370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Wauthy, Xavier, 1996. "Quality Choice in Models of Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 345-53, September.
  3. Krishna, Kala, 1987. "Tariffs versus quotas with endogenous quality," Journal of International Economics, Elsevier, vol. 23(1-2), pages 97-112, August.
  4. Kakwani, Nanak C, 1977. "Applications of Lorenz Curves in Economic Analysis," Econometrica, Econometric Society, vol. 45(3), pages 719-27, April.
  5. Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-19, March.
  6. Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-31, June.
  7. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  8. Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August.
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