Investments in Quality, Collective Reputation and Information Acquisition

Fulvio Fontini, Katrin Millock () and Michele Moretto
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Katrin Millock: Centre d'Economie de la Sorbonne - Paris School of Economics, https://works.bepress.com/millock/

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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: Collective reputation; option value; quality (search for similar items in EconPapers)
JEL-codes: C73 D92 L15 Q52 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013-05
New Economics Papers: this item is included in nep-cta, nep-gth and nep-ore
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Citations: View citations in EconPapers (1)

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ftp://mse.univ-paris1.fr/pub/mse/CES2013/13044.pdf (application/pdf)

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:mse:cesdoc:13044

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