Labels certify that a product meets some standard for quality, but often consumers are unsure of the exact standard that the label represents. Focusing on the case of eco-labels for environmental quality, we show how even small amounts of uncertainty can create consumer confusion that reduces or eliminates the value to firms of adopting voluntary labels. First, consumers are most suspicious of ...

Who gains from more information on the quality of pharmaceutical drugs? Are there incentives for voluntary post-approval clinical trials among pharmaceutical companies? Contrary to popular belief, this paper shows that it is not in the consumer interest that clinical evidence establishing the relative e¤ectiveness within a class of drugs are produced. Pharmaceutical companies, on the other hand...

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...

As a follow-up to earlier reported works on the phytochemical study of some isolated bioactive compounds from root and bark Entandrophragma congoënse as potent anti-plasmodium drugs (Happi et. al.2005), were tested in vitro for antiplasmodial cytotoxicity but no insight was given into binding affinities these compounds, ADMET (Absorption, Distribution, Metabolism, Excretion Toxicity), drug-like...

One striking development associated with the explosion of e-commerce is the increased transparency of sellers’quality history. In this paper we analyze how this affects firms’incentives to invest in quality when the outcome of investment is uncertain. We identify two conflicting effects. On the one hand, reducing the consumer’s cost of search for quality exacerbates the negative effects of past...

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...

Economists have long recognized the importance of trust, but how can trust be enhanced in a marketplace? We set up a rational expectation model that allows the marketplace to target buyer trusting (via a buyer protection program) and seller trustworthiness (via penalty on cheaters) separately. We show that these two policies have opposite effects on the equilibrium level of trust: buyer protect...

Firms signal high quality through high prices even if the market structure is highly competitive and price competition is severe. In a symmetric Bertrand oligopoly where products may differ only in their quality, production cost is increasing in quality and the quality of each firm’s product is private information (not known to consumers or to other firms), we show that there exist fully reveal...

This paper studies the effects of a Standard Setting Organization (SSO) imposing a licensing cap for patents incorporated into a standard. In particular, we evaluate the “Incremental Value” rule as a way to reward firms that contribute technology to a standard. This rule has been proposed as a means of avoiding patent hold-up of licensing firms by granting patent holders compensation equal to t...

In this article we investigate the relationship between quality system and innovation performance using the method of selective matching. We use two French microeconomic surveys, “Changement Organisationnel et Informatisation” (COI 1997) and “Enquête Communautaire sur l’Innovation” (CIS3 1998-2000). We highlight in a first hypothesis a positive relationship between quality (ISO 9000) and innova...