Quality and Competition: An Empirical Analysis across Industries

John M. Crespi, St├ęphan Marette
March 2006  [06-WP 420]

This paper empirically explores the link between quality and concentration in a cross-section of manufactured goods. Using concentration data and product quality indicators, an ordered probit estimation explores the impact of concentration on quality that is defined as an index of quality characteristics. The results demonstrate that market concentration and quality are positively correlated across different industries. When industry concentration increases, the likelihood of the product being higher quality increases and the likelihood of observing a lower quality decreases.

Keywords: concentration, market structure, ordered probit, product differentiation, product quality.

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