Research On The Effects Of Vertical Industrial Organization On The Quality Of Credence Goods

With development of national economy, the quality problem of credence goods, including food safety and medical risk, has become far more frequent in China, and has seriously influenced people’s life and health. The laws and policies to eliminate the business fraud made by suppliers are often unadequately, which means that the problem can only be controled by temporary control, rather than being eliminated fundamentally. Therefore, this dissertation attempts to solve the problem by adjusting the market mechanism. In particular, this dissertation analyses the cause of industrial organization for the quality problem of credence goods at first, and then finds the characteristics of the effects of vertical industrial organization on the quality of credence goods by comparing the different quality of credence goods with different kinds of vertical industrial organization.This dissertation firstly summarizes the existing theories related to the quality of credence goods, and then analyses the the quality of credence goods with the structer of vertical separation by relaxing the hypothesis of vertical integration. Finally, this dissertation summarizes the characteristics of the effects of vertical industrial organization on the quality of credence goods by comparing the different quality of credence goods with different kinds of vertical industrial organization. In case analysis, this dissertation chooses dairy products safety as the case. By observe the behavior of business entity as well as the quality of goods of each link, this dissertation explores the cause of industrial organization for the problem of dairy products safety, and then argues that vertical integration is good to improving the quality of dairy products. Based on the above analysis, this dissertation puts forward the optimization pattern of vertical integration of dairy, that is, profit-sharing system between milk farmers and dairy processing firms as well as concentating both pasture and animal husbandry.The main contributions of this dissertation are listed as the followings:(1)Different from previous paper mostly analyses the problem of quality with perspective of technology and government regulation, this dissertation analyses the problem of quality with perspective of industial organization, which helps to observe the transacting behavior through the whole industrial chain and make up for the limitations of traditional perspective, which is merely able to observe a single link..(2) This dissertation attemps to discern the new proposition which widespreads in reality but has of been summrized by existing theory, in order to break through the limitation of the existing theories related to the quality of credence goods. Based on the established hypothesis, the existing theory has merely explored the role of consumer homogeneous and government regulation in influncing on the quality of credence goods, without arguing the influnce of vertical industrial organization. This dissertation focuses on analysesing the the role of the latter, in order to enrich the existing theory.(3)Based on the discovery in theory, this dissertation explores the cause of industrial organization for the problem of dairy products safety, and then argues that vertical integration is good to improving the quality of dairy products.(4)This dissertation demonstrates that the pattern of firm establishing pasture and the pattern of Scattering animal husbandry would make the quality of the diary product even more unsafe. Insteadly, the profit-sharing system between milk farmers and dairy processing firms, as well as the pattern of concentating both pasture and animal husbandry would improve the the quality of dairy products.