Competition vs. quality in an industry with imperfect traceability

Elodie Rouvière () and Raphael Soubeyran
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Elodie Rouvière: UMR G-EAU - Gestion de l'Eau, Acteurs, Usages - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - AgroParisTech - CEMAGREF - Centre national du machinisme agricole, du génie rural, des eaux et forêts - IRD [Occitanie] - Institut de Recherche pour le Développement - CIHEAM-IAMM - Centre International de Hautes Etudes Agronomiques Méditerranéennes - Institut Agronomique Méditerranéen de Montpellier - CIHEAM - Centre International de Hautes Études Agronomiques Méditerranéennes

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Abstract: We consider an industry where firms produce goods that have different quality levels but firms cannot differentiate themselves from rivals. In this situation, producing low-quality generates a negative externality on the whole industry. This is particularly true when consumers cannot identify producers. In this article, we show that under a "Laissez Faire" situation free entry is not socially optimal and we argue that the imposition of a Minimum Quality Standard (MQS) may induce firms to enter the market. The authors are very grateful to an anonymous referee and Quan Wen as an Associate Editor for their helpful comments and suggestions. We have also benefited from comments from Eric Brousseau, Julie Caswell, Gilles Grolleau, Emmanuel Raynaud, Alban Thomas, Antoine Soubeyran, Hubert Stahn, and Isabelle Vagneron on previous versions. Citation: Elodie Rouviere and Raphael Soubeyran, (2011) ''Competition vs. quality in an industry with imperfect traceability.

Keywords: Entry; Externality; Minimum Quality Standard; Quality (search for similar items in EconPapers)
Date: 2011
Note: View the original document on HAL open archive server: https://agroparistech.hal.science/hal-02643261v2
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Citations: View citations in EconPapers (13)

Published in Economics Bulletin, 2011, 31 (4), pp.3052-3067

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Related works:
Journal Article: Competition vs. quality in an industry with imperfect traceability (2011)
Working Paper: COMPETITION VS. QUALITY IN AN INDUSTRY WITH IMPERFECT TRACEABILITY (2010)
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