Quality Certification Standards in Competitive Markets: When Consumers and Producers (Dis)Agree
Lapan, Harvey E.; Moschini, GianCarlo
Economics Letters Vol. 104 no. 3 (September 2009): 144-147.
A quality certification standard in a competitive setting can improve welfare but may affect consumers and producers differently. In a competitive model with quality preferences of the vertical product differentiation type, we find that producers prefer a higher (lower) quality standard than consumers if individual demand functions are log-convex (log-concave).
JEL Classification: D40
Keywords: Comparative statics, log-concavity, minimum quality standards, quality certification, vertical product differentiation