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A dynamic perspective on minimum quality standards under Cournot competition

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  • Stefan Napel

    ()

  • Gunnar Oldehaver

    ()

Abstract

Imposing a minimum quality standard (MQS) is conventionally regarded as harmful if firms compete in quantities. This, however, ignores its possible dynamic effects. We show that an MQS can hinder collusion, resulting in dynamic welfare gains that reduce and may outweigh the static losses which are caused by regulation's distortive effect on equilibrium qualities. Verdicts on MQS thus depend even more on the market structure at hand than has been acknowledged.

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File URL: http://hdl.handle.net/10.1007/s11149-010-9140-1
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Bibliographic Info

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

Volume (Year): 39 (2011)
Issue (Month): 1 (February)
Pages: 29-49

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Handle: RePEc:kap:regeco:v:39:y:2011:i:1:p:29-49

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

Related research

Keywords: Minimal quality standard; Cournot competition; Collusion; L41; L51; L15; D43;

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References

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  1. Scarpa, Carlo, 1998. "Minimum quality standards with more than two firms1," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 665-676, September.
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  12. 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.
  13. Lutz, Stefan & Lyon, Thomas P & Maxwell, John W, 2000. "Quality Leadership When Regulatory Standards Are Forthcoming," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 331-48, September.
  14. Jehiel, Philippe, 1992. "Product differentiation and price collusion," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 633-641, December.
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  17. Constantatos, Christos & Perrakis, Stylianos, 1998. "Minimum Quality Standards, Entry, and the Timing of the Quality Decision," Journal of Regulatory Economics, Springer, vol. 13(1), pages 47-58, January.
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  20. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
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Cited by:
  1. Rockett, Katharine, 2012. "Perspectives on the knowledge-based society: An introduction to the special issue," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 6(35), pages =1-22.
  2. 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.

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