Minimum Quality Standards and ConsumersÕ 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 InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 532.
Date of creation: 2004
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Other versions of this item:
- Paolo Garella & Emmanuel Petrakis, 2008. "Minimum quality standards and consumers’ information," Economic Theory, Springer, vol. 36(2), pages 283-302, August.
- Paolo Garella & Emmanuel Petrakis, 2005. "Minimum Quality Standards and Consumers Information," Working Papers 0510, University of Crete, Department of Economics.
- 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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