Collective reputation with stochastic production and unknown willingness to pay for quality - HAL-SHS - Sciences de l'Homme et de la Société Accéder directement au contenu
Article Dans Une Revue Environmental Economics and Policy Studies Année : 2018

Collective reputation with stochastic production and unknown willingness to pay for quality

Résumé

In many cases, consumers cannot observe a single firm’s investment in environmental quality or safety, but only the average quality of the industry. The outcome of the investment is stochastic, since firms cannot control perfectly the technology or external factors that may affect production. In addition, firms do not know consumers’ valuation of quality. We characterize the solution of the firms’ investment game and show that the value of stopping investments when firms are already investing in quality can be negative when the free-riding incentives dominate. The existence of systematic uncertainty on the outcome of investment slows down investment in quality, compared to a situation without uncertainty. The uncertainty on consumers’ willingness to pay for quality can speed up or slow down investment. We also obtain the counterintuitive result that information acquisition may decrease the overall level of quality.
Fichier non déposé

Dates et versions

halshs-01802602 , version 1 (29-05-2018)

Identifiants

  • HAL Id : halshs-01802602 , version 1

Citer

Fulvio Fontini, Katrin Millock, Michele Moretto. Collective reputation with stochastic production and unknown willingness to pay for quality. Environmental Economics and Policy Studies, 2018, 20 (2), pp.387-410. ⟨halshs-01802602⟩
94 Consultations
0 Téléchargements

Partager

Gmail Facebook X LinkedIn More