Warning message

CEPR.org and portal.cepr.org will be unavailable between 22:00-22:30 GMT on the 16th September 2019 due to maintenance.

DP1635 | Attribute Dependence and the Provision of Quality

Publication Date


JEL Code(s)


Programme Area(s)


A quality improvement often necessitates modifications of varietal product features. This paper studies firms? incentives to provide quality when this decision affects the goods? degree of horizontal differentiation. Intuitively, one is inclined to argue that private incentives to provide quality are insufficient relative to the social optimum if a quality improvement reduces horizontal differentiation. We find that this argument depends on whether the game is simultaneous or sequential. In the former case private incentives prove excessive relative to the social optimum, and in the latter case, insufficient. As a result, a regulator might want to impose either minimum or maximum quality standards.