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Competition Vs. Quality In An Industry With Imperfect Traceability

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  • Rouviere, Elodie
  • Soubeyran, Raphael

Abstract

We 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 Info

Paper provided by European Association of Agricultural Economists & Agricultural and Applied Economics Association in its series 115th Joint EAAE/AAEA Seminar, September 15-17, 2010, Freising-Weihenstephan, Germany with number 116407.

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Date of creation: 2010
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Handle: RePEc:ags:eaa115:116407

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Related research

Keywords: Entry; Externality; Minimum Quality Standard; Quality; Agricultural and Food Policy; Consumer/Household Economics; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; Food Security and Poverty; Health Economics and Policy; L15; L5;

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References

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  1. P. Garella & P. Petrakis, 2004. "Minimum Quality Standards and ConsumersÕ Information," Working Papers 532, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Winfree, Jason A. & McCluskey, Jill J., 2003. "Collective Reputation And Quality," 2003 Annual meeting, July 27-30, Montreal, Canada 21927, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
  4. Scarpa, Carlo, 1998. "Minimum quality standards with more than two firms1," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 665-676, September.
  5. Crampes, C. & Hollander, A., 1991. "Duopoly and Quality Standards," Cahiers de recherche 9128, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  6. Calvin, Linda, 2007. "Outbreak Linked to Spinach Forces Reassessment of Food Safety Practices," Amber Waves, United States Department of Agriculture, Economic Research Service, June.
  7. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-45, November.
  8. BOCCARD, Nicolas & WAUTHY, Xavier, . "Enforcing domestic quality dominance through quotas," CORE Discussion Papers RP -1756, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Elodie Rouviere & Raphael Soubeyran & Céline Bignebat, 2010. "Heterogeneous efforts in voluntary programmes on food safety," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 37(4), pages 479-499, December.
  10. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
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Cited by:
  1. Martínez-Alvarez, V. & García-Bastida, P.A. & Martin-Gorriz, B. & Soto-García, M., 2014. "Adaptive strategies of on-farm water management under water supply constraints in south-eastern Spain," Agricultural Water Management, Elsevier, vol. 136(C), pages 59-67.
  2. E. Rouvière & K. Latouche, 2014. "Impact of liability rules on modes of coordination for food safety in supply chains," European Journal of Law and Economics, Springer, vol. 37(1), pages 111-130, February.
  3. Andrzej Baniak & Peter Grajzl, 2012. "Equilibrium and Welfare in a Model of Torts with Industry Reputation Effects," CEU Working Papers 2012_4, Department of Economics, Central European University, revised 10 Apr 2012.
  4. Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition: Economic Conditions and Incentives," Working Papers halshs-00793671, HAL.
  5. Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition," AMSE Working Papers 1239, Aix-Marseille School of Economics, Marseille, France.

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