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Vertical Differentiaiton, Trade and Endogenous Common Standards

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  • L. Lambertini
  • G. Rossini

Abstract

Different market settings are considered in a free trade environment, where firms can choose technology, quality, and price or quantity. The shape of competition in prices requires the intervention of governments, via a common antidumping policy to make firms converge on the simultaneous equilibrium which is socially optimal. In the Cournot framework, the equilibria we obtain impinge upon the kind of precommitments undertaken by firms. The coincidence between firms’ behaviour and social preference obtains either when competition is tough, since income is low, or when firms must compete in quantities in the market stage, since they cannot modify qualities. The spontaneous coordination over common standards has to be contrasted with both the case of affluent consumers and Bertrand competition.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 263.

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Date of creation: Jun 1996
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Handle: RePEc:bol:bodewp:263

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  1. Crampes, C. & Hollander, A., 1991. "Duopoly and Quality Standards," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9128, Universite de Montreal, Departement de sciences economiques.
  2. Motta, Massimo & Thisse, Jacques-Francois & Cabrales, Antonio, 1997. "On the Persistence of Leadership or Leapfrogging in International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 809-24, November.
  3. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, Elsevier, vol. 18(2), pages 301-317, August.
  4. Motta, M., 1991. "Sunk costs and trade liberalisation," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1991027, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Giulio Ecchia & Luca Lambertini, 1995. "Minimum Quality Standards and Collusion," Working Papers 235, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
  7. Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 43(1), pages 101-19, March.
  8. Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer.
  9. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
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