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Mutual Recognition of National Minimum Quality Standards may Support International Convergence

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  • Stefan Lutz

    ()

  • Mina Baliamoune-Lutz

    ()

Abstract

In a model of vertical product differentiation, duopolistic firms face quality-dependent costs and compete in quality and price in two segmented markets. Minimum quality standards, set according to the principle of Mutual Recognition, can be used to increase welfare. The results of the one-shot game suggest that standards achieve initial convergence in terms of qualities produced and national welfares. Therefore, the static game is repeated in multiple periods and firms' qualities in the previous period determine their costs. In an N-period game, quality standards will in fact lead to convergence in terms of qualities and national welfares.

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Bibliographic Info

Article provided by Springer in its journal Journal of Industry, Competition and Trade.

Volume (Year): 3 (2003)
Issue (Month): 4 (December)
Pages: 293-311

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Handle: RePEc:kap:jincot:v:3:y:2003:i:4:p:293-311

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Web page: http://springerlink.metapress.com/link.asp?id=105724

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References

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  1. Lutz, Stefan, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," ZEW Discussion Papers 03-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Price competition, quality and income disparities," CORE Discussion Papers RP -370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Martinez-Giralt, Xavier & Pita Barros, Pedro Luis, 1997. "On the Effects of Anti-dumping Legislation," CEPR Discussion Papers 1590, C.E.P.R. Discussion Papers.
  4. Naoto Jinji, 2003. "Strategic policy for product R&D with symmetric costs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 993-1006, November.
  5. H. Lutz, Stefan, 2000. "Trade Effects of Minimum Quality Standards with and without Deterred Entry," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 15, pages 314-344.
  6. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
  7. Lutz, Stefan, 1996. "Does Mutual Recognition of National Minimum Quality Standards Support Regional Convergence?," CEPR Discussion Papers 1385, C.E.P.R. Discussion Papers.
  8. Das, Satya P. & Donnenfeld, Shabtai, 1989. "Oligopolistic competition and international trade : Quantity and quality restrictions," Journal of International Economics, Elsevier, vol. 27(3-4), pages 299-318, November.
  9. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 3-13, January.
  10. Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April.
  11. Cabrales, Antonio & Motta, Massimo & Thisse, Jacques-François, 1995. "On the Persistence of Leadership or Leapfrogging in International Trade," CEPR Discussion Papers 1106, C.E.P.R. Discussion Papers.
  12. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December.
  13. Crampes, C. & Hollander, A., 1991. "Duopoly and Quality Standards," Cahiers de recherche 9128, Universite de Montreal, Departement de sciences economiques.
  14. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, January.
  15. Motta, Massimo, 1992. "Sunk Costs and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(412), pages 578-87, May.
  16. Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-19, March.
  17. Lutz, Stefan, 1996. "Vertical Product Differentiation, Quality Standards, and International Trade Policy," CEPR Discussion Papers 1443, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. Mina Baliamoune & Stefan Lutz, 2009. "Preemption, Predation, and Minimum Quality Standards," ICER Working Papers 20-2009, ICER - International Centre for Economic Research.
  2. Lutz, Stefan, 2005. "Regulatory standards can lead to predation," ZEI Working Papers B 05-2005, ZEI - Center for European Integration Studies, University of Bonn.
  3. Lutz, Stefan, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," ZEW Discussion Papers 03-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Donald MacLaren, 2004. "International Food Safety Standard and Processed Food Exports: Issues of Firm-Level Analysis," Department of Economics - Working Papers Series 905, The University of Melbourne.

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