Reference : Attribute dependence and the provision of quality
Scientific journals : Article
Business & economic sciences : Microeconomics
Attribute dependence and the provision of quality
Degryse, Hans [> >]
Irmen, Andreas mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)]
Regional Science and Urban Economics
Yes (verified by ORBilu)
[en] Competitive Positioning ; Quality ; Multi-dimensional Product Differentiation
[en] A quality improvement often necessitates modifications of varietal product features. This paper studies firms’ incentives to provide quality when this decision affects the goods’ degree of horizontal differentiation. Intuitively, one is inclined to argue that private incentives to provide quality are insufficient relative to the social optimum if a quality improvement reduces horizontal differentiation. We find that this argument depends on whether the game is simultaneous or sequential. In the former case private incentives prove excessive relative to the social optimum, and in the latter case, insufficient. As a result, a regulator might want to impose either minimum or maximum quality standards.<P>(This abstract was borrowed from another version of this item.)
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