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Quality Certification Standards in Competitive Markets: When Consumers and Producers (Dis)Agree

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  • Lapan, Harvey E.
  • Moschini, GianCarlo

Abstract

A quality certification standard in a competitive setting can improve welfare but may affect consumers and producers differently. In a competitive model with quality preferences of the vertical product differentiation type, we find that producers prefer a higher (lower) quality standard than consumers if individual demand functions are log-convex (log-concave).

Suggested Citation

  • Lapan, Harvey E. & Moschini, GianCarlo, 2009. "Quality Certification Standards in Competitive Markets: When Consumers and Producers (Dis)Agree," Staff General Research Papers Archive 13048, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:13048
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    References listed on IDEAS

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    1. Champsaur, Paul & Rochet, Jean-Charles, 1989. "Multiproduct Duopolists," Econometrica, Econometric Society, vol. 57(3), pages 533-557, May.
    2. Rabah Amir & Isabelle Maret & Michael Troege, 2004. "On Taxation Pass-Through for a Monopoly Firm," Annals of Economics and Statistics, GENES, issue 75-76, pages 155-172.
    3. Lapan, Harvey E. & Moschini, GianCarlo, 2007. "AJAE Appendix: Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 89(3), pages 1-6, August.
    4. 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 1328-1346, December.
    5. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    6. Harvey Lapan & GianCarlo Moschini, 2007. "Grading, Minimum Quality Standards, and the Labeling of Genetically Modified Products," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 769-783.
    7. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    8. Tim Baldenius & Stefan Reichelstein, 2000. "Comparative statics of monopoly pricing," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(2), pages 465-469.
    9. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
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    Cited by:

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    More about this item

    Keywords

    Comparative statics; log-concavity; minimum quality standards; quality certification; vertical product differentiation;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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