Better Product Quality May Lead to Lower Product Price

Does better information lead to lower prices? Price and Advertising Signaling under External Information about Product Quality

Firms have traditionally used price and advertising to signal product quality when consumers initially are not well-informed about qualities of competing sellers. In the last two decades, the Internet has made it more feasible for buyers to connect with new sellers and products which they cannot inspect before purchase. But the Internet also provides abundant external sources of information abo...

Better Product at Same Cost, Lower Sales and Lower Welfare

We analyze the effect of product quality on the output of a high-quality dominant firm facing a low-quality competitive fringe. Using a standard vertical differentiation model, we show that profit maximizing output decreases with product quality when the dominant firm’s marginal cost is lower than that of the fringe, is independent of quality when marginal cost is the same for all firms, and is...

Improving Process Development for Better Product Quality

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Product Quality , Product Price , and Share Dynamics in the German Compact Car Market by Uwe

The present paper examines one of the central elements of evolutionary thinking competition formalized by the replicator dynamics mechanism. Using data on product characteristics of automobiles sold on the German domestic market over the period 2001-2006, we construct a competitiveness or tness variable for each car model applying non-parametric e ciency measurement techniques. The basic questi...

Effects of Price Premiums for Multiple Product Attributes on Product Quality: California Processing Tomatoes