Attribute Dependence and the Provision of Quality

Hans Degryse and Andreas Irmen

No 1635, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Competitive Positioning; Multi-dimensional product differentiation; Quality Standards (search for similar items in EconPapers)
JEL-codes: D21 L15 (search for similar items in EconPapers)
Date: 1997-04
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Related works:
Journal Article: Attribute dependence and the provision of quality (2001)
Working Paper: Attribute dependence and the provision of quality (1997)
Working Paper: Attribute dependence and the provision of quality (1997)
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