Investments in Quality, Collective Reputation and Information Acquisition

Fulvio Fontini, Katrin Millock () and Michele Moretto
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Katrin Millock: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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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 matters, 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: Qualité; réputation collective; valeur d'option; Collective reputation; option value; quality (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-com and nep-cta
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00825782v1
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Published in 2013

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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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