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Trade Effects of Minimum Quality Standards with and without Deterred Entry

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Author Info
Lutz, Stefan

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Abstract

In a model of vertical product differentiation, duopolistic firms face quality-dependent costs and compete on quality and price in two segmented markets. Minimum quality standards, set uniformly or according to the principle of mutual recognition, can be used to increase welfare. The analysis includes entry deterrence by the choice of a particular standard. With identical costs, both industries remain in the market under either regulatory alternative. Mutual recognition is the optimal policy choice for either region. With significantly different costs, the full-harmonization outcome includes only one firm and leads to a maximal sum of regional welfares.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1384.

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Date of creation: Apr 1996
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Handle: RePEc:cpr:ceprdp:1384

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Related research
Keywords: Entry; Oligopoly; Product Differentiation; Quality Standards; Trade;

Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Lutz, Stefan & Turrini, Alessandro Antonio, 2000. "Skills, Labour Costs and Vertically Differentiated Industries: A General Equilibrium Analysis," CEPR Discussion Papers 2373, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Jacques Pelkmans, 2003. "Mutual Recognition in Goods and Services: An Economic Perspective," Economics Working Papers 016, European Network of Economic Policy Research Institutes. [Downloadable!]
  3. Stéphan Marette, 2007. "Minimum safety standard, consumers’ information and competition," Journal of Regulatory Economics, Springer, vol. 32(3), pages 259-285, December. [Downloadable!] (restricted)
  4. Marette, Stéphan, 2007. "Minimum Safety Standard, Consumers’ Information, and Competition (The)," Staff General Research Papers 12718, Iowa State University, Department of Economics. [Downloadable!]
    Other versions:
  5. Jørgen Hansen & Jørgen Nielsen, 2009. "Dumping and Injury Margins in Markets with Horizontal as well as Vertical Product Differentiation," Journal of Industry, Competition and Trade, Springer, vol. 9(3), pages 233-250, September. [Downloadable!] (restricted)
  6. 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). [Downloadable!]
  7. 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. [Downloadable!]
    Other versions:
  8. Werner Smolny, 2003. "Determinants of innovation behaviour and investment estimates for west-german manufacturing firms," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 12(5), pages 449-463, October. [Downloadable!] (restricted)
  9. T. Huw Edwards, 2004. "Trade and Strategic Regulatory Bias in Monopolistic Industries," Discussion Paper Series 2004-21, Department of Economics, Loughborough University, revised Sep 2004. [Downloadable!]
  10. SHELDON, Ian & Roe, Brian, 2008. "Vertical Differentiation and Credence Goods: Harmonized Labeling and Gains from International Integration," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6340, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  11. Alberto AMURGO PACHECO, 2006. "Mutual Recognition Agreements and Trade Diversion: Consequences for Developing Nations," HEI Working Papers 20-2006, Economics Section, The Graduate Institute of International Studies, revised Jun 2007. [Downloadable!]
  12. Marco Trombetta, 2003. "International regulation of audit quality: full harmonization or mutual recognition? An economic approach," European Accounting Review, Taylor and Francis Journals, vol. 12(1), pages 3-27, May. [Downloadable!] (restricted)
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