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Enforcing Domestic Quality Dominance through Quotas

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  • Nicolas Boccard
  • Xavier Wauthy

Abstract

We study duopoly competition between a domestic and a foreign firm who first choose their quality and then compete in prices in the domestic market. As is well known, the free-trade equilibrium exhibits quality differentiation and indeterminacy of the quality leader. We show that an import quota can enforce, as the unique subgame-perfect equilibrium outcome, the quality ranking that favors the domestic producer and thereby can increase domestic welfare. Copyright Blackwell Publishing Ltd 2005..

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 13 (2005)
Issue (Month): 2 (05)
Pages: 250-261

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Handle: RePEc:bla:reviec:v:13:y:2005:i:2:p:250-261

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Cited by:
  1. Elodie Rouviere & Raphael Soubeyran, 2011. "Competition vs. quality in an industry with imperfect traceability," Economics Bulletin, AccessEcon, vol. 31(4), pages 3052-3067.
  2. Nguyen, Xuan & Sgro, Pasquale & Nabin, Munirul, 2014. "Licensing under vertical product differentiation: Price vs. quantity competition," Economic Modelling, Elsevier, Elsevier, vol. 36(C), pages 600-606.
  3. Rouviere, Elodie & Soubeyran, Raphael, 2008. "Collective Reputation, Entry and Minimum Safety Standard," 2008 International Congress, August 26-29, 2008, Ghent, Belgium, European Association of Agricultural Economists 44465, European Association of Agricultural Economists.
  4. Olivier Bonroy & Christos Constantatos, 2005. "Minimum Quality Standards and Equilibrium Selection with Asymmetric Firms," Industrial Organization, EconWPA 0506009, EconWPA.
  5. Hodaka Morita & Xuan Nguyen, 2012. "FDI and Technology Spillovers under Vertical Product Di erentiation," Discussion Papers, School of Economics, The University of New South Wales 2012-19, School of Economics, The University of New South Wales.

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