The purpose of this paper is to construct a basic profit model of quality so as to highlight the economic implications of process quality in an accessible way.
Economic evaluation of the four profit parameters (price, unit costs, sales, fixed costs) using microeconomic analysis. For each parameter, the effect of better quality is described and a general logic to assess its profit impact developed.
For all four examined parameters, it can be shown that better quality results in better financial performance. Profit and quality are therefore positively correlated.
The presented research is of conceptual nature, based on the objective to establish a general profit model of quality. The single parts of the described economic logic of quality might be subjected to empirical examination.
The arguments presented in this paper can help quality practitioners to better understand the economics of striving for best possible quality.
This paper fulfills an identified research gap by combining the disciplines of economics and quality management and tries to advance a profit perspective on quality which is suited to replace the still dominant cost perspective.
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