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Elodie Rouviere and Raphael Soubeyran
''Competition vs. quality in an industry with imperfect traceability.''
( 2011, Vol. 31 No.4 )
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.
Keywords: Entry, Externality, Minimum Quality Standard, Quality.
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L5 - Regulation and Industrial Policy: General
Manuscript Received : Jan 26 2011 Manuscript Accepted : Oct 26 2011

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