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Production, Quality and Markets

Author

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  • Donald George

Abstract

The quality of output is of great concern to firms, consumers and regulators and yet firms' decisions concerning quality receive far less attention from economists than quantity or pricing decisions. There is a substantial management literature on product quality which, to some extent, discusses the costs and benefits of various approaches to product quality, but does not provide a theoretical explanation of the firm's quality decisions. The model presented here incorporates production, quality control, warranty and pricing decisions into the firm's overall (expected) profit maximising behaviour. Both competitive and monopolistic markets are considered.

Suggested Citation

  • Donald George, 1997. "Production, Quality and Markets," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(1), pages 21-31.
    • Handle: RePEc:taf:ijecbs:v:4:y:1997:i:1:p:21-31
    DOI: 10.1080/758532191
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    References listed on IDEAS

    as
    1. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
    2. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    3. Roland N. McKean, 1970. "Products Liability: Implications of Some Changing Property Rights," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(4), pages 611-626.
    4. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
    5. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(4), pages 659-679.
    6. Walter Y. Oi, 1973. "The Economics of Product Safety," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 3-28, Spring.
    7. Geoffrey Heal, 1977. "Guarantees and Risk-Sharing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 549-560.
    8. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
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    More about this item

    Keywords

    Quality; Management; Warranties; JEL Classification: D21; D82; L14; L15; M21;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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