Archives quotidiennes :

Quality competition on markets: a socio-economic account

Malte Doehne (2024)

Socio-Economic Review. Online first, open access

Abstract. When, and for whom, does it pay to make high-quality products? This article models how quality competition incentivizes producers to make products of particular qualities. Quality is defined as an abstract property of products that explains relative markups on prices that buyers will pay for otherwise comparable goods. Relative differences in quality sustain interlinked quality niches whose appeal to producers vary. The ordering of niches by quality and its implications for profitability establish the market’s quality order of production. The model yields testable predictions for the locus of quality-related innovations. An analysis of the bottle closures used on 52880 German wines by 1028 winemakers in three winemaking regimes supports the general claim that, and a specific claim as to how, quality competition incentivizes producers to pursue different quality-related strategies. The presented model situates quality competition and the socially embedded quality order of production at the heart of a socio-economic account of markets.

Extract: “More generally, acknowledging that markets may locate in one or any of the failed regions of the market plane draws attention to a basic economic-sociological insight: that markets are embedded into society more broadly. Market stability is hardly a pure outcome of the profit-maximizing behavior of producers, as White’s formal account requires. Instead, what appears impossible from a viewpoint that is predicated on producers’ profit- maximizing efforts may yet be sustained by other factors, such as commonly held narratives and cultural framings (White, 2000; M€utzel, 2009; Godart and Claes, 2017), established customer relations (Chiffoleau and Laporte, 2006), conventions (Favereau et al., 2002), local social contexts (Doehne et al., 2024a), deep-seated principles of evaluation (Boltanski and Thévenot, 2006 [1991]; Diaz-Bone, 2005), state interventions (Fligstein, 2001; Doehne et al., 2023) or evaluative schemas that stabilize valuations of product quality at the producer’s level (Lynn et al., 2009; Hsu et al., 2012; Malter, 2014). Acknowledging that market participants compete not only on price but also on quality entails that producers actively shape buyers’ perceptions to improve their market position (Musselin and Paradeise, 2005; Beckert and Musselin, 2013; Musselin, 2018). The presented model operationalizes the time-varying outcome of such quality competition in the relative performance of producers and their changing positions on the quality order of production.” (p. 23)

Lien / Link