Investments in Quality, Collective Reputation and Information Acquisition

Fulvio Fontini, Katrin Millock and Michele Moretto
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Katrin Millock: Paris School of Economics, CNRS, Centre d’Economie de la Sorbonne

No 2013.53, Working Papers from Fondazione Eni Enrico Mattei

Abstract: In many cases consumers cannot observe firms’ investment in quality or safety, but have only beliefs on the average quality of the industry. In addition, the outcome of the collective investment game of the firms may be stochastic since firms cannot control perfectly the technology or external factors that may affect production. In such situations, when only consumers’ subjective perceptions of the industry level of quality matter, the regulator may make information available to firms or subsidize their information acquisition. Under what conditions is it desirable to make information available? We show how firms’ overall level of investment in quality depends upon the parameters of the quality accumulation process, the cost of investment and the number of firms in the industry. We also show the potentially negative effects on the total level of quality from providing information on consumers’ actual valuation.

Keywords: Collective Reputation; Option Value; Quality (search for similar items in EconPapers)
JEL-codes: C73 D92 L15 Q52 (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-cta, nep-mic and nep-ore
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Investments in Quality, Collective Reputation and Information Acquisition (2013)
Working Paper: Investments in Quality, Collective Reputation and Information Acquisition (2013)
Working Paper: Investments in Quality, Collective Reputation and Information Acquisition (2013)
Working Paper: Investments in Quality, Collective Reputation and Information Acquisition (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2013.53

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