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Quality Aspects of Economic Transition: The Effect of Inferior Quality on the Market

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  • Tamara Todorova

Abstract

The paper explores the quality problem as a major challenge before transitional economies. It uses Akerlof’s model of misrepresented quality in an attempt to study it as the reason for market failure in the new democracies. The determinants of poor quality in the region of Eastern Europe are presented and the role of opportunism as the major cause of deceptive quality is revealed in the context of the staggering transaction costs East European countries are faced with. Reputation and the costs of dishonesty for East European producers are discussed.

Suggested Citation

  • Tamara Todorova, 2004. "Quality Aspects of Economic Transition: The Effect of Inferior Quality on the Market," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 59-78.
  • Handle: RePEc:bas:econst:y:2004:i:2:p:59-78
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    References listed on IDEAS

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    1. Gould, Joseph R, 1981. "On the Interpretation of Inferior Goods and Factors," Economica, London School of Economics and Political Science, vol. 48(192), pages 397-405, November.
    2. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
    3. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    4. Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-754, July/Aug..
    5. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
    6. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
    7. Herbert A. Simon, 1991. "Organizations and Markets," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 25-44, Spring.
    8. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
    9. Richard G. Lipsey & Gideon Rosenbluth, 1971. "A Contribution to the New Theory of Demand: A Rehabilitation of the Giffen Good," Canadian Journal of Economics, Canadian Economics Association, vol. 4(2), pages 131-163, May.
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    Cited by:

    1. Tamara Todorova, 2011. "Adverse Effects of Transaction Costs in East European Economies," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 2(1).

    More about this item

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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