Author : Kala Krishna
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.3/5 (243 download)
Book Synopsis A New Model of Quality by : Kala Krishna
Download or read book A New Model of Quality written by Kala Krishna and published by . This book was released on 1998 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a new model of quality to capture the idea that even if a customer chooses to purchase a product, it may fail to deliver.' In this event, the customer may wish to choose some other product. We model this as a two stage game where firms first choose quality and then price. We find that in equilibrium, the high quality firm (the one with a higher probability of being able to deliver') will always make higher profits than the low quality one even if costs of quality are sharply increasing. Our work thus provides a reason for high quality niches to be inherently more profitable. The implications for welfare and equilibrium under free entry are also studied.