Minimum quality standards and consumers’ information

Paolo Garella and Emmanuel Petrakis

Departmental Working Papers from Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano

Abstract: The literature so far has analyzed the effects of Minimum Quality Standards (MQS) in oligopoly, using models of pure vertical differentiation, with only two firms, and perfect information. We consider products that are differentiated horizontally and vertically, with imperfect consumers' information, and more than two firms. We show that a MQS changes the consumers' perception of produced qualities. This increases the firms' returns from quality enhancing investments, notwithstanding contrary strategic effects. Our analysis justifies the use of MQS in industries where consumers cannot precisely ascertain the quality of goods, for instance pharmaceuticals or products with chemical components involved

Keywords: Minimum Quality Standards; Imperfect Consumer Information; Oligopoly; Horizontal and Vertical Product Differentiation; Industry Regulation (search for similar items in EconPapers)
JEL-codes: L0 L5 (search for similar items in EconPapers)
Date: 2007-04-23
New Economics Papers: this item is included in nep-com, nep-mic and nep-mkt
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Related works:
Journal Article: Minimum quality standards and consumers’ information (2008)
Working Paper: Minimum Quality Standards and Consumers Information (2005)
Working Paper: Minimum Quality Standards and Consumers Information (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mil:wpdepa:2007-12

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