Capacity Restraints for Quality, Asymmetric Information, and the Inclination for Big Sales: Taking the Food Safety Problem
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| Title | Capacity Restraints for Quality, Asymmetric Information, and the Inclination for Big Sales: Taking the Food Safety Problem
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| Author | Li Xiang |
| Organization | The School of Management, Fudan University The School of Mathematics and Statistics, Nanjing Audit University |
| Email | idealli@21cn.com |
| Key Words | Investment in the Quality Control；Capacity Restraints；Inclination for Big Sales |
| Abstract | From a technological and informational perspective, we give an explanation for the ignorance of quality control and the inclination for the big sales in food industries, especially in the dairy industry. We show that the competition pressure is not the crucial reason. If the market is large enough and the capacity of high quality goods under low investment is relatively small, firms are not willing to make enough investment in the quality control and are inclined to set low price for big sales, which would be viewed by consumers as an imperfect signal of high investment. To strengthen the supervising will not change the ‘low investment and big sales’ status, but will increase the probability of high investment and therefore improve the quality on average. |
| Serial Number | WP76 |
| Time | 2011-07-20 |
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