Quality Premiums and the Competitive Firm's Production Decision

The impact of price-quality schedule changes on the 'optimal input choice' of producers which subscribe to a minimum quality standard is investigated using the stochastic dominance method. In addition, the effects of a transition from a fixed price schedule to a quality-dependent price schedule are examined. The correlations between production technology, a minimum quality standard and price levels needed to ensure that total and marketed output remains the same are also discussed.