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Competition vs. quality in an industry with imperfect traceability

Author

Listed:
  • Elodie Rouviere

    (AgroParisTech)

  • Raphael Soubeyran

    (INRA, UMR1135 LAMETA, F-34000 Montpellier, France.)

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.

Suggested Citation

  • Elodie Rouviere & Raphael Soubeyran, 2011. "Competition vs. quality in an industry with imperfect traceability," Economics Bulletin, AccessEcon, vol. 31(4), pages 3052-3067.
    • Handle: RePEc:ebl:ecbull:eb-11-00057
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    References listed on IDEAS

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    9. Elodie Rouviere & Raphael Soubeyran & Céline Bignebat, 2010. "Heterogeneous efforts in voluntary programmes on food safety," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 37(4), pages 479-499, December.
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    12. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
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    Cited by:

    1. E. Rouvière & K. Latouche, 2014. "Impact of liability rules on modes of coordination for food safety in supply chains," European Journal of Law and Economics, Springer, vol. 37(1), pages 111-130, February.
    2. Fulvio Fontini & Katrin Millock & Michele Moretto, 2018. "Collective reputation with stochastic production and unknown willingness to pay for quality," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 20(2), pages 387-410, April.
    3. Rupayan Pal & Marcella Scrimitore & Ruichao Song, 2023. "Externalities, entry bias, and optimal subsidy policy for cleaner environment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(1), pages 90-122, February.
    4. Jaeck Mélanie & Lifran Robert & Stahn Hubert, 2014. "Emergence of Organic Farming under Imperfect Competition: Economic Conditions and Policy Instruments," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 12(1), pages 95-108, January.
    5. Baniak Andrzej & Grajzl Peter, 2013. "Equilibrium and Welfare in a Model of Torts with Industry Reputation Effects," Review of Law & Economics, De Gruyter, vol. 9(2), pages 265-302, October.
    6. Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition: Economic Conditions and Incentives," Working Papers hal-02805961, HAL.
    7. Mélanie Jaeck & Robert Lifran & Hubert Stahn, 2012. "Emergence of Organic Farming under Imperfect Competition," AMSE Working Papers 1239, Aix-Marseille School of Economics, France.
    8. Rouvière, Elodie, 2016. "Small is beautiful: firm size, prevention and food safety," Food Policy, Elsevier, vol. 63(C), pages 12-22.
    9. Brishti Guha, 2017. "Moral hazard, Bertrand competition and natural monopoly," Journal of Economics, Springer, vol. 121(2), pages 153-171, June.
    10. Rouvière, Elodie & Royer, Annie, 2017. "Public Private Partnerships in food industries: A road to success?," Food Policy, Elsevier, vol. 69(C), pages 135-144.
    11. Martínez-Alvarez, V. & García-Bastida, P.A. & Martin-Gorriz, B. & Soto-García, M., 2014. "Adaptive strategies of on-farm water management under water supply constraints in south-eastern Spain," Agricultural Water Management, Elsevier, vol. 136(C), pages 59-67.

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    More about this item

    Keywords

    Entry; Externality; Minimum Quality Standard; Quality.;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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