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Title:The Strategic Use of Private Quality Standards in Vertical Relations PDF Logo
Authors:Teichmann, Isabel
von Schlippenbach, Vanessa
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Two-Sided Markets and Vertical Restraints E8-V3
Abstract:This paper highlights the strategic role of private quality standards in vertical relations. Considering two symmetric downstream firms that are exclusively supplied by a finite number of upstream firms, we show that there exist asymmetric equilibria in the downstream firms' quality requirements. While one downstream firm has an incentive to exaggerate her quality requirements to weaken her suppliers' outside options, the competitor's best response is to reduce her own quality requirements. The higher (lower) quality standard is set above (below) the social optimum. It turns out that the use of private quality standards induces a decrease in social welfare.
Subjects:Private Quality Standards
Vertical Relations
Buyer Power
Food Supply Chain
JEL:L15
L42
Q13
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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