Reputation Leaders, Quality Laggards: Incentive Structure in Markets with Both Private and Collective Reputations

A theoretical model is developed to illustrate the economic incentives to invest in quality in markets with a dual reputation structure: private (firm reputation) and collective (regional reputation). Numerical dynamic programming techniques are then used to simulate firms’ strategic behaviour, and...

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Bibliographic Details
Published in:Journal of agricultural economics 2012-06, Vol.63 (2), p.245-264
Main Authors: Costanigro, Marco, Bond, Craig A., McCluskey, Jill J.
Format: Article
Language:English
Subjects:
Business reputation
Collective reputation
dynamic games
dynamic programming
Economic incentives
firm reputation
geographical indications
information and product quality
Investment strategies
L14
L15
Market analysis
Market structure
markets
Q14
Quality standards
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Summary:A theoretical model is developed to illustrate the economic incentives to invest in quality in markets with a dual reputation structure: private (firm reputation) and collective (regional reputation). Numerical dynamic programming techniques are then used to simulate firms’ strategic behaviour, and competitive outcomes are compared to the optimal investment of a regional planner. Market and product characteristics inducing asymmetric and/or sub‐optimal investment strategies, potentially destabilising for the region, are investigated.
ISSN:0021-857X
1477-9552
DOI:10.1111/j.1477-9552.2011.00331.x