产业经济学英文版课件：6-Product Quality

1、6-Product Quality1Search GoodsWith some products the customers either have sufficient everyday knowledge or can research the product so as to predict its quality before purchaseA dressa new kitchen table, or a flight from New York to Boston2Experience GoodsThe quality can only be determined by use a

2、nd experience, after purchase.the performance of a new manager in an organization is very hard for the employer to predictan over-the-counter drug might cure your headache or it might not, but the only way to find out is to try it3Monopoly Provision of Quality4The Effect of Incremental Quality on th

3、e Monopolists Revenue5The Effect of Incremental Quality on Surplus6Comparison of Profit-Maximizing and Surplus-Maximizing Quality Levelss is the socially optimal quality s is the quality which maximizes profits for the monopolist 7Example8Example9Example10Quality DiscriminationWhy does it seem that

4、when you want to buy a suit, the inexpensive models are just too shoddy, and the expensive ones are just too expensive? Why dont the manufacturers produce something in betweena moderate quality at a moderate price? Why is first-class air travel so expensive, but economy class so uncomfortable? 11Qua

5、lity DiscriminationThe idea of quality discrimination is that a multiproduct monopolist (or at least a firm with market power) can manipulate the quality of the goods that it sells so as to increase profits by capturing more consumer surplus. 12Quality Discrimination13Quality DiscriminationIn a qual

6、ity-discriminating equilibrium, the quality of low-quality items is reduced by a monopolist in order to prevent other consumers from switching away from her high-quality products.The product of highest quality is still chosen optimally.14Moral Hazard and the Provision of QualityMoral hazard refers t

7、o any situation where one side to a transaction has an incentive to change the terms of the exchange, unobserved by the other side. 15Moral Hazard and the Provision of Quality: restaurants in tourist areasIf the consumer were expecting high quality and were willing to pay for it, the manufacturer wo

8、uld always have an incentive to reduce quality to the lowest level, knowing that the tourist would not return.The consumers will expect this outcome, and so the market will tend to settle at a low-quality/low-price equilibrium, even though higher quality and higher price could even be Pareto improvi

9、ng. Perhaps this explains why restaurants in tourist areas typically offer unappetizing food.16The Lemons Problem17The Lemons ProblemThe only possible equilibrium in the used car market is one in which only lemons are put up for sale. This phenomenon, known as pure adverse selection, involves the pr

10、esence of bad quality products driving out the good, so that certain markets (in this case the market for good used cars) can disappear altogether.18The Lemons ProblemIn markets for health insurance, the premiums will have to reflect the average expenditures for people in a given category. That mean

11、s the insurance will be a good deal for sick people but a bad one for those who are healthy. Only sick people will buy the policy, and thus the market for “healthy peoples” medical insurance will disappear. 19The Lemons ProblemSince the problem here is one of asymmetric information, in many markets

12、of this kind instruments arise designed to sort out the good from the bad and restore the functioning of the “good” market. In the used-car market, certifying agencies exist that will test a used vehicle for a fee before purchase. In insurance markets, the company can probe the purchasers characteri

13、stics, to the extent that they are legally able, to try to sort the sick from the healthy. Nevertheless, the problem of adverse selection remains a pervasive one in all markets in which different qualities exist and only one side is well informed.20Signalling High QualityAdvertising as a Signal of Q

14、ualityWarranties21Advertising as a Signal of QualityA firm can advertise to signal quality, where only the fact of the advertising is important, not any objective information conveyed. By choosing an advertising level, and possibly a price, which cannot be profitably imitated by a low-quality produc

15、er, a firm can achieve a separating equilibrium in which buyers can distinguish high-quality producers.22WarrantiesWarranties are another instrument available for signaling quality. By offering a warranty a high-quality producer may also be able to achieve a separating equilibrium.A full warranty ma

16、kes the consumer not care about quality (ignoring transaction costs) and so the manufacturer has no incentive to lie about quality. The offer of a warranty will always cause the manufacturer to increase the quality produced, assuming that it can be varied.23WarrantiesSince warranties affect the quality of the product, t