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 inJournal of agricultural economics Vol. 63; no. 2; pp. 245 - 264
Main Authors Costanigro, Marco, Bond, Craig A., McCluskey, Jill J.
Format Journal Article
LanguageEnglish
Published Oxford, UK Blackwell Publishing Ltd 01.06.2012
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.
Bibliography:http://dx.doi.org/10.1111/j.1477-9552.2011.00331.x
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ArticleID:JAGE331
Marco Costanigro and Craig Bond are with the Department of Agricultural and Resource Economics, Colorado State University, USA. E‐mail
marco.costanigro@colostate.edu
for correspondence. Jill McCluskey is Professor, School of Economic Sciences, Washington State University, USA. The authors wish to thank without implicating Ron Mittelhammer and Jon Yoder for helpful comments on the early stages of this research, and also the reviewers and editors for their help with the final version.
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ISSN:0021-857X
1477-9552
DOI:10.1111/j.1477-9552.2011.00331.x