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Minimum Quality Standards and Collusion

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  • Giulio Ecchia
  • Luca Lambertini

Abstract

The authors model the introduction of a minimum quality standard in a vertically differentiated duopoly. They extend the literature by determining the standard endogenously, showing that the maximization of social welfare entails an increase in the surplus accruing to consumers served by the low quality firm and a decrease in the surplus of the remaining consumers. Then, the authors consider the effects of the standard on the stability of price collusion, proving that the standard makes it more difficult for firms to collude if consumers are sufficiently rich. Copyright 1997 by Blackwell Publishing Ltd

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Bibliographic Info

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 235.

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Date of creation: Oct 1995
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Handle: RePEc:bol:bodewp:235

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  1. Besanko, David & Donnenfeld, Shabtai & White, Lawrence J, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 102(4), pages 743-67, November.
  2. Besanko, David & Donnenfeld, Shabtai & White, Lawrence J, 1988. "The Multiproduct Firm, Quality Choice, and Regulation," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 36(4), pages 411-29, June.
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