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Competition and the Incentive to Produce High Quality By RACHEL E. KRANTON University of Maryland, College Park Final version received 17 July 2001. Previous literature indicates that, when quality is a choice variable, firms have an incentive to produce high quality to maintain their reputations with consumers. The strategic interactionPublished in Economica · 2003Authors Rachel E KrantonAffiliation University of Maryland College ParkAbout Professional association · Market share · Political science
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Furthermore, low-quality goods may actually be preferred if they are sufficiently cheaper. (III) Agree. Signals quality and is cheaper for quality producers (IV) Disagree. By requiring all forms to offer extensive warranties, the government negates the market signaling of warranties offered by the producers of high quality goods.
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