Minimum quality standards and consumers’ information
AbstractThe literature so far has analyzed the effects of Minimum Quality Standards (MQS) in oligopoly, using models of pure vertical differentiation, with only two firms, and perfect information. We consider products that are differentiated horizontally and vertically, with imperfect consumers' information, and more than two firms. We show that a MQS changes the consumers' perception of produced qualities. This increases the firms' returns from quality enhancing investments, notwithstanding contrary strategic effects. Our analysis justifies the use of MQS in industries where consumers cannot precisely ascertain the quality of goods, for instance pharmaceuticals or products with chemical components involved
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 36 (2008)
Issue (Month): 2 (August)
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Web page: http://link.springer.de/link/service/journals/00199/index.htm
Other versions of this item:
- Paolo Garella & Emmanuel Petrakis, 2005. "Minimum Quality Standards and Consumers Information," Working Papers 0510, University of Crete, Department of Economics.
- P. Garella & P. Petrakis, 2004. "Minimum Quality Standards and ConsumersÕ Information," Working Papers 532, Dipartimento Scienze Economiche, Universita' di Bologna.
- Paolo G. GARELLA & Emmanuel PETRAKIS, 2007. "Minimum quality standards and consumers’ information," Departmental Working Papers 2007-12, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- L0 - Industrial Organization - - General
- L5 - Industrial Organization - - Regulation and Industrial Policy
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