2006–2010

Yardstick Competition and Quality

Reprint No. 2009:19

Author(s): Thomas TangeråsYear: 2009 Title: Journal of Economics & Management Strategy Volume (No.): 18 (2) Pages: 589–613
Online article (restrictions may apply)


This paper explores the consequences for quality of introducing yardstick competition in duopoly when a verifiable quality indicator is available. Yardstick competition can be implemented by amenu of transfers that are linear in the cost differential between the two firms and in quality. Cost- and quality incentives are stronger in larger firms when improvements are highly valued by consumers and firms can significantly influence quality. Expenditures on quality improvement can increase or decrease following the introduction of yardstick competition. The crucial factor is the likelihood ratio of productivity between the two firms, not productivity differences.


Reference:
Tangerås, Thomas (2009), "Yardstick Competition and Quality". Journal of Economics & Management Strategy 18(2), 589–613.

Thomas Tangerås

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Interdisciplinary European Studies

The European Union and the Return of the Nation State

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This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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