Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/75425
Authors: 
Fontini, Fulvio
Millock, Katrin
Moretto, Michele
Year of Publication: 
2013
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 53.2013
Abstract: 
In many cases consumers cannot observe firms' investment in quality or safety, but have only beliefs on the average quality of the industry. In addition, the outcome of the collective investment game of the firms may be stochastic since firms cannot control perfectly the technology or external factors that may affect production. In such situations, when only consumers' subjective perceptions of the industry level of quality matter, the regulator may make information available to firms or subsidize their information acquisition. Under what conditions is it desirable to make information available? We show how firms' overall level of investment in quality depends upon the parameters of the quality accumulation process, the cost of investment and the number of firms in the industry. We also show the potentially negative effects on the total level of quality from providing information on consumers' actual valuation.
Subjects: 
Collective Reputation
Option Value
Quality
JEL: 
C73
D92
L15
Q52
Document Type: 
Working Paper

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