Some companies choose to invest huge amounts in building up their brand names. Their advertising says, "We are committed to providing customers with quality goods, reliable products. If we don't give you good products, our advertising expenditures will have been wasted."
Of course this is all probabilistic. Some firms play games with the above mechanism and cheat (VW mileage, anyone), but for the most part it holds true.
Consider Parmesan Cheese [via RK]. It seems that some producers adulterate the product.
Cellulose [wood fibre] is a safe additive [to reduce clumping], and an acceptable level is 2 percent to 4 percent, according to Dean Sommer, a cheese technologist at the Center for Dairy Research in Madison, Wisconsin. Essential Everyday 100% Grated Parmesan Cheese, from Jewel-Osco, was 8.8 percent cellulose, while Wal-Mart Stores Inc.’s Great Value 100% Grated Parmesan Cheese registered 7.8 percent, according to test results. Whole Foods 365 brand didn’t list cellulose as an ingredient on the label, but still tested at 0.3 percent. Kraft had 3.8 percent. ...
According to the FDA’s report on Castle, obtained through the Freedom of Information Act, “no parmesan cheese was used to manufacture” the Market Pantry brand 100% grated Parmesan Cheese, sold at Target Corp. stores, and Always Save Grated Parmesan Cheese and Best Choice 100% Grated Parmesan Cheese, sold by Associated Wholesale Grocers Inc., which along with its subsidiaries supplies 3,400 retail stores in 30 states. Instead, there was a mixture of Swiss, mozzarella, white cheddar and cellulose, according to the FDA.
In other words, the brand name products in which companies had invested considerable advertising expenditure tended to be more reliably within acceptable limits of cellulose content. This expenditure to enhance their "reputation asset" is consistent with the signaling theories of advertising.
These theories argue that simply by spending a lot of money on advertising, firms like Kraft are telling the customers that Kraft has made a commitment to the quality of their products. It would be unprofitable for them to spend all that money advertising a product, and then produce an inferior good.
And this argument is repeated succinctly by Ms. Eclectic, who often says, "I don't buy no-name products."