Misleading Advertising and Minimum Quality Standards
AbstractThis paper examines the relationship between misinformation about product quality and quality standards, such as minimum quality standards and certi cation criteria, when products are vertically di erentiated in their health/safety aspects. We investigate the welfare e ect of regulating misinformation and strengthening MQSs. We nd that when the amount of misinformation on both low- and high-quality products is small, regulating misinformation on low-quality products reduces welfare, although the strictness of an MQS influences its e ect. On the other hand, regulating misinformation on high-quality products always improves welfare. We also nd that a stricter MQS can harm welfare. This, in particular, is likely to occur when the di erence between the perceived quality of the two types of products is large and when rms generate high degrees of misperceptions. Moreover, we extend the analysis by endogenizing quality investments and demonstrate that regulating misinformation on high-quality products may deteriorate their true quality and, thus, reduce welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by School of Economics, Kwansei Gakuin University in its series Discussion Paper Series with number 74.
Length: 35 pages
Date of creation: Aug 2011
Date of revision: Aug 2011
Contact details of provider:
Postal: 1-155 Uegahara Ichiban-cho, Nishinomiya, Hyogo 662-8501
Web page: http://www-econ.kwansei.ac.jp/~econ/index_e.html
More information through EDIRC
Advertising; Minimum quality standards; Misinformation; Vertical differentiation;
Find related papers by JEL classification:
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- M37 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Advertising
- Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-29 (All new papers)
- NEP-COM-2011-08-29 (Industrial Competition)
- NEP-MKT-2011-08-29 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zeynep Hansen & Marc T. Law, 2006.
"The Political Economy of "Truth-in-Advertising" Regulation During the Progressive Era,"
NBER Working Papers
11927, National Bureau of Economic Research, Inc.
- Zeynep K. Hansen & Marc T. Law, 2008. "The Political Economy of Truth-in-Advertising Regulation during the Progressive Era," Journal of Law and Economics, University of Chicago Press, vol. 51(2), pages 251-269, 05.
- Klaus G. Grunert, 2005. "Food quality and safety: consumer perception and demand," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(3), pages 369-391, September.
- E. Bacchiega & L. Lambertini & A. Mantovani, 2006.
"On MQS regulation, innovation and market coverage,"
575, Dipartimento Scienze Economiche, Universita' di Bologna.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
- Paul R. Milgrom & John Roberts, 1984.
"Price and Advertising Signals of Product Quality,"
Cowles Foundation Discussion Papers
709, Cowles Foundation for Research in Economics, Yale University.
- Glaeser, Edward L. & Ujhelyi, Gergely, 2010.
Journal of Public Economics,
Elsevier, vol. 94(3-4), pages 247-257, April.
- Toshimitsu, Tsuyoshi, 2008. "On the effects of emission standards as a non-tariff barrier to trade in the case of a foreign Bertrand duopoly: A note," Resource and Energy Economics, Elsevier, vol. 30(4), pages 578-584, December.
- Anderson, Simon P & Renault, Régis, 2005.
CEPR Discussion Papers
5064, C.E.P.R. Discussion Papers.
- Julie A. Caswell & Siny Joseph, 2007.
"Consumer Demand for Quality: Major Determinant for Agricultural and Food Trade in the Future?,"
Food Marketing Policy Center Research Reports
097, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
- Caswell, Julie & Joseph, Siny, 2007. "Consumer Demand for Quality: Major Determinant for Agricultural and Food Trade in the Future?," Research Reports 149196, University of Connecticut, Food Marketing Policy Center.
- Julie A. Caswell & Siny Joseph, 2007. "Consumer Demand for Quality: Major Determinant for Agricultural and Food Trade in the Future?," Working Papers 2007-4, University of Massachusetts Amherst, Department of Resource Economics.
- Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008.
"Coarse Thinking and Persuasion,"
The Quarterly Journal of Economics,
MIT Press, vol. 123(2), pages 577-619, 05.
- Giulio Ecchia & Luca Lambertini & Carlo Scarpa, 2001. "On the Regulation of Vertically Differentiated Markets Through Minimum Quality Standards," Rivista di Politica Economica, SIPI Spa, vol. 91(4), pages 171-216, April-May.
- Amandine Garde, 2008. "Food Advertising and Obesity Prevention: What Role for the European Union?," Journal of Consumer Policy, Springer, vol. 31(1), pages 25-44, March.
- Mahenc, Philippe, 2009.
Open Access publications from University of Toulouse 1 Capitole
http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Mahenc Philippe, 2009. "Wasteful Labeling," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(2), pages 1-20, December.
- José Moraga-González & Noemi Padrón-Fumero, 2002. "Environmental Policy in a Green Market," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 22(3), pages 419-447, July.
- Kihlstrom, Richard E & Riordan, Michael H, 1984. "Advertising as a Signal," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 427-50, June.
- Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
- Keisuke Hattori & Keisaku Higashida, 2011.
"Misleading Advertising in Duopoly,"
Discussion Paper Series
69, School of Economics, Kwansei Gakuin University, revised Mar 2011.
- Hamilton, Stephen F. & Zilberman, David, 2006. "Green markets, eco-certification, and equilibrium fraud," Journal of Environmental Economics and Management, Elsevier, vol. 52(3), pages 627-644, November.
- Schmalensee, Richard, 1978. "A Model of Advertising and Product Quality," Journal of Political Economy, University of Chicago Press, vol. 86(3), pages 485-503, June.
- Becker, Gary S & Murphy, Kevin M, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, MIT Press, vol. 108(4), pages 941-64, November.
- Nicholas E. Piggott & Thomas L. Marsh, 2004. "Does Food Safety Information Impact U.S. Meat Demand?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 154-174.
- Keisuke Hattori & Keisaku Higashida, 2012. "Who Benefits from Misleading Advertising?," Discussion Paper Series 85, School of Economics, Kwansei Gakuin University, revised Mar 2012.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Toshihiro Okada).
If references are entirely missing, you can add them using this form.