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| Author: | Kranton, R.E. |
| Title: | Competition and the incentive to produce high quality |
| Journal: | Economica
2003 : AUG, VOL. 70:279, p. 385-404 |
| Index terms: | Competition Market share Quality Reputation |
| Language: | eng |
| Abstract: | Previous literature has found that, when quality is a choice variable, companies have an incentive to produce high quality to maintain their reputation with consumers. This startegic interaction among companies and competition for market share is not considered. This article finds that, when companies compete for market share, perfect equilibria in which companies produce high-quality goods need not exist. Competition for customers can eliminate the price premium needed to induce companies to maintain a reputation for high-quality production. |
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