The literature so far has analyzed the effects ofminimum quality standards (MQS) in oligopoly, usingmodels of pure vertical differentiation, with only two firms, and perfect information. We consider products that are differentiated horizontally and vertically, with imperfect consumers’ information, and more than two firms. We show that a MQS changes the consumers’ perception of produced qualities. This increases the firms’ returns from quality enhancing investments, notwithstanding contrary strategic effects. Our analysis justifies the use ofMQSin industrieswhere consumers cannot precisely ascertain the quality of goods, for instance pharmaceuticals or products with chemical components involved.

Minimum quality standards and consumers information / P. Garella, E. Petrakis. - In: ECONOMIC THEORY. - ISSN 0938-2259. - 36:2(2008), pp. 283-302.

Minimum quality standards and consumers information

P. Garella
Primo
;
2008

Abstract

The literature so far has analyzed the effects ofminimum quality standards (MQS) in oligopoly, usingmodels of pure vertical differentiation, with only two firms, and perfect information. We consider products that are differentiated horizontally and vertically, with imperfect consumers’ information, and more than two firms. We show that a MQS changes the consumers’ perception of produced qualities. This increases the firms’ returns from quality enhancing investments, notwithstanding contrary strategic effects. Our analysis justifies the use ofMQSin industrieswhere consumers cannot precisely ascertain the quality of goods, for instance pharmaceuticals or products with chemical components involved.
Horizontal and vertical product differentiation; Imperfect consumer information; Industry regulation; Minimum quality standards; Oligopoly
Settore SECS-P/01 - Economia Politica
2008
http://www.springer.com/economics/economic+theory/journal/199
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2434/40953
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