Abstract

Due to several possible production modes, an industrial output may have different quality levels. Production processes and quality assurance plans are chosen and adjusted, generally as a lagged reaction to customers’ input and competitors’ strategy. Different techniques based on cost benefit analysis have existed to assess beforehand the overall benefits to society of such decisions; however, these techniques do not necessarily provide any insight as to the resulting influence on corporate profits. This paper reviews different perspectives on industrial quality and adopts a formalism in which social and corporate optimum can be compared from an engineering standpoint. The potential benefits for a manufacturer to improve the quality of its products are studied under several market conditions. The incentive is the strongest in a competitive environment where the benefits of quality innovation are twofold: quality innovation increases consumers’ demand and allows the manufacturer to keep more substantial profit margins.

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