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Minimum Quality Standards, Entry, and the Timing of the Quality Decision

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  • Constantatos, Christos
  • Perrakis, Stylianos

Abstract

This paper examines the effects of the imposition of minimum quality standards (MQS) on a vertically differentiated natural duopoly with free entry. It is shown that the welfare effects of MQS are crucially dependent upon the timing of the quality choice with respect to the decision to enter the market. If irreversible decision to enter is taken without pre-commitment to a specific quality level then a welfare improving MQS always exists. If, however, a firm's product quality must be decided prior to entry then a MQS is either redundant or counterproductive, since it can induce a monopoly. Copyright 1998 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Regulatory Economics.

Volume (Year): 13 (1998)
Issue (Month): 1 (January)
Pages: 47-58

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Handle: RePEc:kap:regeco:v:13:y:1998:i:1:p:47-58

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Web page: http://www.springerlink.com/link.asp?id=100298

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Cited by:
  1. L. Lambertini & C. Scarpa, 1999. "Minimum Quality Standards and Predatory Behaviour," Working Papers 353, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Stéphan Marette, 2007. "Minimum safety standard, consumers’ information and competition," Journal of Regulatory Economics, Springer, vol. 32(3), pages 259-285, December.
  3. Stefan Napel & Gunnar Oldehaver, 2011. "A dynamic perspective on minimum quality standards under Cournot competition," Journal of Regulatory Economics, Springer, vol. 39(1), pages 29-49, February.
  4. Schmidt, Robert C., 2009. "Welfare in differentiated oligopolies with more than two firms," International Journal of Industrial Organization, Elsevier, vol. 27(4), pages 501-507, July.
  5. Stefan Lutz & Mario Pezzino, 2012. "International Strategic Choice of Minimum Quality Standards and Welfare," Journal of Common Market Studies, Wiley Blackwell, vol. 50(4), pages 594-613, 07.
  6. Min Chen & Konstantinos Serfes, 2012. "Minimum quality standard regulation under imperfect quality observability," Journal of Regulatory Economics, Springer, vol. 41(2), pages 269-291, April.
  7. M. Alvisi, 2000. "Fixed Costs and Equilibrium in Models of Vertical Differentiation," Working Papers 437, Dipartimento Scienze Economiche, Universita' di Bologna.
  8. Mina Baliamoune & Stefan Lutz, 2009. "Preemption, Predation, and Minimum Quality Standards," ICER Working Papers 20-2009, ICER - International Centre for Economic Research.
  9. Giulio ECCHIA & Luca LAMBERTINI, 2001. "Endogenous Timing and Quality Standards in a Vertically Differentiated Duopoly," Discussion Papers (REL - Recherches Economiques de Louvain) 2001021, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  10. S Lutz, 2005. "Regulatory Standards Can Lead to Predation," The School of Economics Discussion Paper Series 0509, Economics, The University of Manchester.
  11. Stefan Napel & Gunnar Oldehaver, 2007. "Static Costs vs. Dynamic Benefits of a Minimum Quality Standard under Cournot Competition," Discussion Papers 23, Aboa Centre for Economics.

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