Vertically Linked Industries, Product Quality and Minimum Quality Standards

Abstract

This paper extends the seminal model of vertical product differentiation by Ronnen (1991) to a two‐tier supply chain. While Ronnen considers the duopoly case, we add a vertical structure such that each downstream firm procures an input from a monopolistic upstream supplier. While simultaneous up‐ and downstream regulation in the form of a minimum quality standard restores Ronnen's findings, if only one firm is regulated in the vertical chain, a free‐rider effect results: all the bargaining power is given to the non‐regulated member of the chain, which uses it to free‐ride on the pressure exerted by the regulator onto the other member.

Green practices and sustainability performance: the exploratory links of organizational culture and quality improvement practices

“…, 2021; Valmohammadi and Roshanzamir, 2015). High commitment to product quality is essential to strengthen organizational performance (Aboelmaged, 2018; Hofmann and Oldehaver, 2016). Leaders and their employees need to establish an understanding of shared behaviors rooted in a culture of quality excellence (Rashid and Aslam, 2012; Wang, 2019).…”

“…Organizational culture is an excellent tool to establish routines that link quality to performance (Ghadimi et al, 2021) and can be used to integrate regulations and standards into everyday operations while maintaining a high level of performance and productivity (Carvalho et al, 2021;Valmohammadi and Roshanzamir, 2015). High commitment to product quality is essential to strengthen organizational performance (Aboelmaged, 2018;Hofmann and Oldehaver, 2016). Leaders and their employees need to establish an understanding of shared behaviors rooted in a culture of quality excellence (Rashid and Aslam, 2012;Wang, 2019).…”

Strategies to Influence a Quality and Compliance Culture

“…Defective products, when recalled from the market, result in lost revenue, potentially increased product liabilities, and decreased customer satisfaction (Garstenauer et al, 2014;Hofmann & Oldehaver, 2016;Rosencrance & Wu, 2015). These product quality issues affect brand equity and long-term market share, and may influence business survival due to lost sales (Nagaich & Sadhna, 2015;Rosencrance & Wu, 2015).…”

“…In addition, shortages of drug and healthcare products potentially impact the quality of life achievable by consumers. Without a commitment to quality and compliance, an enterprise may produce substandard products driving higher business risks, and in drug, medical, and consumer healthcare products, increasing the possibility of unintended side effects and health affects (Hofmann & Oldehaver, 2016). Key factors such as leadership behaviors and the habits of employees in the organization must align to create and sustain a culture of quality and compliance.…”

“…Issues with product quality and product risk may result in negative impacts to business, social, and professional elements including business reputation, challenges to business sustainability that impact local communities, and constraints on the treatments and healthcare products available to consumers. When recalled from the market, defective products result in lost revenue, potentially increased product liabilities, and decreased customer satisfaction (Garstenauer, Blackburn, & Olson, 2014;Hofmann & Oldehaver, 2016;Rosencrance & Wu, 2015). These product quality issues affect brand equity and long-term market share, and may influence business survival due to lost sales (Nagaich & Sadhna, 2015;Rosencrance & Wu, 2015).…”