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Does Mutual Recognition of National Minimum Quality Standards Support Regional Convergence?

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  • Lutz, Stefan

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 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.

Suggested Citation

  • Lutz, Stefan, 1996. "Does Mutual Recognition of National Minimum Quality Standards Support Regional Convergence?," CEPR Discussion Papers 1385, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1385
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    Citations

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    Cited by:

    1. Lorenzo Garbo, 2002. "International convergence in regulation: The case of measurable standards," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 8(1), pages 10-19, February.
    2. Stefan Lutz & Mina Baliamoune-Lutz, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 293-311, December.

    More about this item

    Keywords

    Oligopoly; Product Differentiation; Quality Standards; Regional Convergence; Trade;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • 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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