Does Mutual Recognition of National Minimum Quality Standards Support Regional Convergence?
AbstractIn 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 according to the principle of Mutual Recognition, can be used to increase welfare. The results of the one-shot game suggest that standards achieve initial convergence in terms of qualities produced and national welfares. Therefore, the static game is repeated in multiple periods and firms’ qualities in the previous period determine their costs. In an N-period game, quality standards will, in fact, lead to convergence in terms of qualities and national welfares.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1385.
Date of creation: May 1996
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- 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
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- Herguera, Iñigo & Lutz, Stefan, . "Trade policy and leapfrogging," Open Access publications from Universidad Carlos III de Madrid info:hdl:10016/7214, Universidad Carlos III de Madrid.
- 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.
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