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Quality Adjustment in Non-spanning Markets with Variety Aversion

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  • Kazuhiko Nishimura

Abstract

This paper examines the dynamic process of quality adjustment in cases where the economy lacks a sufficient number of markets for coordinating the level of attributes that configure the qualities of products. It shows that an adjustment process through the development and selection of commodities with different qualities may succeed in achieving efficiency or at least, meet the necessary conditions for efficiency. This is true if the user can identify with the altered product and is unaffected by variety in the commodity. It also holds true when the consumer assesses product variety in a smooth (differentiable) function, but not necessarily so if the assessment is non-smooth regarding the homogeneous state. An unidentifiable case can also be subject to inefficiency as the effort of a small quality adjusting agent becomes attenuated. JEL Classification: L15, H23, O33. Copyright K. Nishimura; licensee Springer 2013

Suggested Citation

  • Kazuhiko Nishimura, 2013. "Quality Adjustment in Non-spanning Markets with Variety Aversion," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 2(1), pages 1-18, December.
    • Handle: RePEc:spr:jecstr:v:2:y:2013:i:1:p:1-18:10.1186/2193-2409-2-6
    DOI: 10.1186/2193-2409-2-6
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    References listed on IDEAS

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    1. Kimitoshi Sato, 2012. "Nonmyopia and incentives in the piecewise linearized MDP procedures with variable step-sizes," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 1(1), pages 1-23, December.
    2. Kaiser Karen, 2011. "Variety Aversion and Information Overload: An Experimental Approach," Working Papers 2011-01, Banco de México.
    3. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    4. Eiji Hosoda, 2012. "Recycling of waste and downgrading of secondary resources in a classical type of production model," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 1(1), pages 1-22, December.
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    More about this item

    Keywords

    Quality adjustment; Adaptive selection; Trial and error; Variety averse; Non-spanning markets;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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