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Collective Reputation, Entry and Minimum Quality Standard

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  • Rouviere, Elodie
  • Soubeyran, Raphael

Abstract

This article deals with the issue of entry into an industry where firms share a collective reputation. First, we show that free entry is not socially optimal; there is a need for regulation through the imposition of a minimum quality standard. Second, we argue that a minimum quality standard can induce firms to enter the market. Contrary to conventional wisdom, a minimum quality standard should not always be considered as a barrier to entry.

Suggested Citation

  • Rouviere, Elodie & Soubeyran, Raphael, 2008. "Collective Reputation, Entry and Minimum Quality Standard," Economic Theory and Applications Working Papers 6325, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemet:6325
    DOI: 10.22004/ag.econ.6325
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    File URL: https://ageconsearch.umn.edu/record/6325/files/wp080007.pdf
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    References listed on IDEAS

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    1. Giulio Ecchia & Luca Lambertini, 1997. "Minimum Quality Standards and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 45(1), pages 101-113, March.
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    3. Stéphan Marette, 2007. "Minimum safety standard, consumers’ information and competition," Journal of Regulatory Economics, Springer, vol. 32(3), pages 259-285, December.
    4. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(1), pages 1-22.
    5. 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.
    6. Miguel Carriquiry & Bruce A. Babcock, 2007. "Reputations, Market Structure, and the Choice of Quality Assurance Systems in the Food Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(1), pages 12-23.
    7. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
    8. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-1346, December.
    9. Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-245, November.
    10. Kwamena K. Quagrainie & Jill J. McCluskey & Maria L. Loureiro, 2003. "A Latent Structure Approach to Measuring Reputation," Southern Economic Journal, John Wiley & Sons, vol. 69(4), pages 966-977, April.
    11. Calvin, Linda, 2007. "Outbreak Linked to Spinach Forces Reassessment of Food Safety Practices," Amber Waves:The Economics of Food, Farming, Natural Resources, and Rural America, United States Department of Agriculture, Economic Research Service, pages 1-8, June.
    12. repec:bla:jindec:v:45:y:1997:i:1:p:101-13 is not listed on IDEAS
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    Cited by:

    1. Stefano Castriota & Marco Delmastro, 2011. "Inside the black box of collective reputation," Quaderni del Dipartimento di Economia, Finanza e Statistica 89/2011, Università di Perugia, Dipartimento Economia.

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