Misleading Advertising and Minimum Quality Standards
This 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.
|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
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.
- Edward L. Glaeser & Gergely Ujhelyi, 2006.
NBER Working Papers
12784, National Bureau of Economic Research, Inc.
- 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.
- Nelson, Philip, 1974. "Advertising as Information," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 729-54, July/Aug..
- Hui-Shung Chang & Henry W. Kinnucan, 1991. "Advertising, Information, and Product Quality: The Case of Butter," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(4), pages 1195-1203.
- Crampes, C. & Hollander, A., 1991.
"Duopoly and Quality Standards,"
Cahiers de recherche
9128, Universite de Montreal, Departement de sciences economiques.
- G. Ecchia & L. Lambertini, 1995.
"Minimum Quality Standards and Collusion,"
235, Dipartimento Scienze Economiche, Universita' di Bologna.
- Keisuke Hattori & Keisaku Higashida, 2012.
"Misleading advertising in duopoly,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 45(3), pages 1154-1187, August.
- 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.
- 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.
- 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.
- 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.
- Avinash Dixit & Victor Norman, 1978. "Advertising and Welfare," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 1-17, Spring.
- Matsumura, Toshihiro & Sunada, Takeaki, 2013. "Advertising competition in a mixed oligopoly," Economics Letters, Elsevier, vol. 119(2), pages 183-185.
- Bagwell, Kyle, 2007. "The Economic Analysis of Advertising," Handbook of Industrial Organization, Elsevier.
- E. Bacchiega & L. Lambertini & A. Mantovani, 2006.
"On MQS regulation, innovation and market coverage,"
575, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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.
- 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.
- Mahenc Philippe, 2009. "Wasteful Labeling," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 7(2), pages 1-20, December.
- Kenneth Baltzer, 2011.
"Standards vs. labels with imperfect competition and asymmetric information,"
IFRO Working Paper
2011/1, University of Copenhagen, Department of Food and Resource Economics.
- Baltzer, Kenneth, 2012. "Standards vs. labels with imperfect competition and asymmetric information," Economics Letters, Elsevier, vol. 114(1), pages 61-63.
- Shleifer, Andrei & Mullainathan, Sendhil & Schwartzstein, Joshua, 2008.
"Coarse Thinking and Persuasion,"
11022284, Harvard University Department of Economics.
- Benham, Lee, 1972. "The Effect of Advertising on the Price of Eyeglasses," Journal of Law and Economics, University of Chicago Press, vol. 15(2), pages 337-52, October.
- Ulrich Lehmann-Grube, 1997. "Strategic Choice of Quality When Quality is Costly: The Persistence of the High-Quality Advantage," RAND Journal of Economics, The RAND Corporation, vol. 28(2), pages 372-384, Summer.
- Simon P. Anderson & Régis Renault, 2006.
American Economic Review,
American Economic Association, vol. 96(1), pages 93-113, March.
- Pauline M. Ippolito & Alan D. Mathios, 1990. "Information, Advertising and Health Choices: A Study of the Cereal Market," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 459-480, Autumn.
- 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.
- 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.
- 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.
- Gary S. Becker & Kevin M. Murphy, 1993. "A Simple Theory of Advertising as a Good or Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 108(4), pages 941-964.
- 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.
- 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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:kgu:wpaper:74. 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: (Toshihiro Okada)
If references are entirely missing, you can add them using this form.