Groupe d’études et de recherche en analyse des décisions

G-92-03

The Preference for Quality

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We investigate here the problems raised by the demand for quality. In particular, we show that the (inverse) demand, which yields the price the consumers are willing to pay for a commodity as a function of both quantity and quality, need not be monotone increasing with respect to quality, contrary to the usual assumption made from researchers working on the production side of the economy. We also show that, when technology improvements allow for the production of some commodity with various (or continuous) quality types, then, unless existence of a market for quality is assumed (as in the Lancaster characteristics framework for example) there is an a priori indeterminacy in the quantity-quality bundlest hat will be demanded. We show how, to some extent, resolve this indeterminacy, and give an economic definition of the concept of quality price.

, 13 pages