A Model of Endogenous Quality Management

Abstract

This paper is concerned with product quality, defined as a kind of durability. Existing models of product quality (in the sense considered here) depend on the idea of signalling, itself driven by an informational asymmetry dictated by “Nature”. The paper proposes an alternative approach, which endogenises the quality managment process. A model is developed which is applicable to the markets for consumer durables and for some intermediate goods. Both competitive and monopolistic markets are considered, and some comparative static results are obtained.