IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-00243080.html
   My bibliography  Save this paper

Collective Reputation and Market Structure: Regulating the Quality vs Quantity Trade-of

Author

Listed:
  • Pierre Fleckinger

    (CECO - Laboratoire d'économétrie de l'École polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique)

Abstract

Between market unraveling and individual reputation building, markets for experience goods often exhibit intermediate patterns. This paper explores the situation in which consumers know the average quality offered by a set of producers, but not the quality of one given product. A first issue is how such an aggregate signal shapes competition when strategic variables are quantity and quality. The equilibrium welfare function is convex in the number of competing firms as a consequence of decreasing quality and increasing quantity. A second issue is regulation. It is possible to trade-off quantity against quality through a number of regulatory tools. Among one-instrument policies, entry and quantity regulation perform better than price-based regulation. Policy implications for professional regulation in service markets and producers' organisations in agriculture are briefly discussed.

Suggested Citation

  • Pierre Fleckinger, 2007. "Collective Reputation and Market Structure: Regulating the Quality vs Quantity Trade-of," Working Papers hal-00243080, HAL.
  • Handle: RePEc:hal:wpaper:hal-00243080
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00243080
    as

    Download full text from publisher

    File URL: https://hal.archives-ouvertes.fr/hal-00243080/document
    Download Restriction: no

    References listed on IDEAS

    as
    1. David Besanko & Shabtai Donnenfeld & Lawrence J. White, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 743-767.
    2. William Novshek, 1985. "On the Existence of Cournot Equilibrium," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 85-98.
    3. Rabah Amir & Val E. Lambson, 2000. "On the Effects of Entry in Cournot Markets," Review of Economic Studies, Oxford University Press, vol. 67(2), pages 235-254.
    4. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 1-22.
    5. Charles D. Kolstad & Lars Mathiesen, 1987. "Necessary and Sufficient Conditions for Uniqueness of a Cournot Equilibrium," Review of Economic Studies, Oxford University Press, vol. 54(4), pages 681-690.
    6. Geoffrey Heal, 1976. "Do Bad Products Drive Out Good?," The Quarterly Journal of Economics, Oxford University Press, vol. 90(3), pages 499-502.
    7. Carl Shapiro, 1982. "Consumer Information, Product Quality, and Seller Reputation," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 20-35, Spring.
    8. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    9. Van Long, Ngo & Soubeyran, Antoine, 2000. "Existence and uniqueness of Cournot equilibrium: a contraction mapping approach," Economics Letters, Elsevier, vol. 67(3), pages 345-348, June.
    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 1328-1346, December.
    11. Gérard Gaudet & Stephen W. Salant, 1991. "Uniqueness of Cournot Equilibrium: New Results From Old Methods," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 399-404.
    12. Marette, Stephan & Crespi, John M & Schiavina, Allesandra, 1999. "The Role of Common Labelling in a Context of Asymmetric Information," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 26(2), pages 167-178, June.
    13. Auriol, Emmanuelle & Schilizzi, Steven G.M., 2003. "Quality Signaling through Certification. Theory and an Application to Agricultural Seed Market," IDEI Working Papers 165, Institut d'Économie Industrielle (IDEI), Toulouse.
    14. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
    15. Combris, Pierre & Lecocq, Sebastien & Visser, Michael, 1997. "Estimation for a Hedonic Price Equation for Bordeaux Wine: Does Quality Matter?," Economic Journal, Royal Economic Society, vol. 107(441), pages 390-402, March.
    16. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    17. Strausz, Roland, 2005. "Honest certification and the threat of capture," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 45-62, February.
    18. 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.
    19. Stéphan Marette & John Crespi, 2003. "Can Quality Certification Lead to Stable Cartels?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(1), pages 43-64, August.
    20. Jason A. Winfree & Jill J. McCluskey, 2005. "Collective Reputation and Quality," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 206-213.
    21. Auriol, Emmanuelle, 1998. "Deregulation and quality," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 169-194, March.
    22. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-137, May.
    23. Josh Lerner & Jean Tirole, 2006. "A Model of Forum Shopping," American Economic Review, American Economic Association, vol. 96(4), pages 1091-1113, September.
    24. Bagwell, Kyle & Riordan, Michael H, 1991. "High and Declining Prices Signal Product Quality," American Economic Review, American Economic Association, vol. 81(1), pages 224-239, March.
    25. Asher Wolinsky, 1983. "Prices as Signals of Product Quality," Review of Economic Studies, Oxford University Press, vol. 50(4), pages 647-658.
    26. 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.
    27. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Daniela Benavente, 2010. "Geographical Indications: The Economics of Claw-Back," IHEID Working Papers 11-2010, Economics Section, The Graduate Institute of International Studies.
    2. Stefano Castriota & Marco Delmastro, 2010. "Individual and Collective Reputation: Lessons from the Wine Market," L'industria, Società editrice il Mulino, issue 1, pages 149-172.
    3. Benavente, Daniela, 2010. "Geographical Indications: The Economics of Claw-Back," Miscellaneous Papers 119117, Agecon Search.
    4. McQuade, Timothy & Salant, Stephen W. & Winfree, Jason, 2009. "Markets with untraceable goods of unknown quality: a market failure exacerbated by globalization," MPRA Paper 21874, University Library of Munich, Germany.
    5. Benavente, Daniela, 2010. "The Economics of Geographical Indications: GIs modeled as club assets," Miscellaneous Papers 119116, Agecon Search.
    6. Baniak Andrzej & Grajzl Peter, 2013. "Equilibrium and Welfare in a Model of Torts with Industry Reputation Effects," Review of Law & Economics, De Gruyter, vol. 9(2), pages 265-302, October.
    7. Daniela Benavente, 2010. "The Economics of Geographical Indications: GIs Modelled As Club Assets," IHEID Working Papers 10-2010, Economics Section, The Graduate Institute of International Studies.
    8. Adalja, Aaron & Lichtenberg, Erik, 2016. "Foodborne Illness Outbreaks, Collective Reputation, and Voluntary Adoption of Industry-wide Food Safety Protocols by Fruit and Vegetable Growers," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235865, Agricultural and Applied Economics Association.
    9. Bailet, Isabelle & Diotallevi, Francesco & Marchini, Andrea, 2010. "Determinant factors in reputation of wines:analysis of wine production in Central Italy," MPRA Paper 40635, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00243080. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.