Managing Quality under Heterogeneous Consumer Demand and Product Quality, October 2005

Based on accepted advances in the marketing, economics, consumer behavior, and satisfaction literatures, we develop a micro-foundations model of a firm that needs to manage the quality of a product that is inherently heterogeneous in the presence of varying customer tastes or expectations for quality. Our model blends elements of the returns to quality, customer lifetime value, and service profit chain approaches to marketing. The model is then used to explain several empirical results pertaining to the marketing literature by explicitly articulating the trade-offs between customer satisfaction and costs (including opportunity costs) of quality. In this environment firms will find it optimal to allow some customers to go unsatisfied. We show that the relationship between the expected number of repeated purchases by an individual customer is endogenous to the choice of quality by the firm, indicating that the number of purchases cannot be chosen freely to estimate a customer’s lifetime value.

Quality and Competition: An Empirical Analysis across Industries, March 2006

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.

Vertical Product Differentiation, Entry-Deterrence Strategies, and Entry Qualities, September 2005

We analyze the entry of a new product into a vertically differentiated market in which an entrant and an incumbent compete in prices. Here the entry-deterrence strategies of the incumbent firm rely on “limit qualities.” With a sequential choice of quality, a quality-dependent marginal production cost, and a fixed entry cost, we relate the entry-quality decision and the entry-deterrence strategies to the level of entry cost and the degree of consumer heterogeneity. Quality-dependent marginal production costs in the model entail the possibility of inferior-quality entry as well as an incumbent’s aggressive entry-deterrence strategies of increasing its quality level toward potential entry. Welfare evaluation confirms that social welfare is not necessarily improved when entry is encouraged rather than deterred.

Testing Guide for Implementing Concrete Paving Quality Control Procedures, March 2008

Construction of portland cement concrete pavements is a complex process. A small fraction of the concrete pavements constructed in the United States over the last few decades have either failed prematurely or exhibited moderate to severe distress. In an effort to prevent future premature failures, 17 state transportation agencies pooled their resources, and a pooled fund research project, Material and Construction Optimization for Prevention of Premature Pavement Distress in PCC Pavements, was undertaken in 2003. Its purpose was to evaluate existing quality control tests, and then select and advance the state-of-the-practice of those tests most useful for optimizing concrete pavements during mix design, mix verification, and construction. This testing guide is one product of that project. The guide provides three recommended testing schemes (Levels A, B, and C, depending on a pavement’s design life and traffic volumes, etc.) that balance the costs of testing with the risk of failure for various project types. The recommended tests are all part of a comprehensive suite of tests described in detail in this guide.

Asphalt Cement Concrete Longitudinal Joint Adhesive Crafco PN 34524 (Iowa DOT New Product C-98-7), HR-2084, 2000

The joint between two lanes of asphalt pavement is often the first area of a roadway which shows signs of deterioration and requires maintenance. As the final lift of hot asphalt is being placed in a construction project, it is being forced p against the adjoining lane of cold asphalt, forming the longitudinal joint. The mating of the two lanes, to form a high quality seal, is often not fully successful and later results in premature stripping or raveling as water enters the unsealed joint. The application of a hot poured rubberized asphaltic joint sealant along the joint face in the final stage of construction should help to form a watertight joint seal. A new product, especially formulated for the longitudinal joint in asphalt pavements was proposed to improve joint sealing. The following describes the experimental application of the new product, Crafco, PN 34524.