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International Strategic Choice of Minimum Quality Standards and Welfare

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  • Stefan Lutz
  • Mario Pezzino

Abstract

We study the influence of minimum quality standards in a two-region partial-equilibrium model of vertical product differentiation and trade. Three alternative standard setting arrangements are considered: Full Harmonization, National Treatment and Mutual Recognition. The analysis integrates the choice of a particular standard setting alternative by governments into the model. We provide a set of sufficient conditions for which Mutual Recognition emerges as one regulatory alternative that always improves welfare in both regions when compared to the case without regulation. We show that Mutual Recognition, being the default procedure if governments do not reach a unanimous decision, is the only possible equilibrium of the game.

Suggested Citation

  • Stefan Lutz & Mario Pezzino, 2009. "International Strategic Choice of Minimum Quality Standards and Welfare," ICER Working Papers 02-2009, ICER - International Centre for Economic Research.
    • Handle: RePEc:icr:wpicer:02-2009
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    References listed on IDEAS

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    1. Stefan Lutz & Thomas P. Lyon & John W. Maxwell, 2000. "Quality Leadership when Regulatory Standards are Forthcoming," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 331-348, September.
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    18. Hansen, Jørgen Drud & Møller Nielsen, Jørgen Ulff, 2006. "Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 837-860.
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    Cited by:

    1. Chatterjee, Susmita & Chattopadhyay, Srobonti & Chatterjee, Rittwik & Dutta, Debabrata, 2017. "Public Firm in Mixed Oligopolistic Structure: A Theoretical Exposition," MPRA Paper 80073, University Library of Munich, Germany, revised 15 May 2017.
    2. Birg, Laura & Voßwinkel, Jan S., 2015. "Minimum quality standards and exports," University of Göttingen Working Papers in Economics 248, University of Goettingen, Department of Economics.
    3. Stefan Lutz & Mario Pezzino, 2010. "Mixed oligopoly, vertical product differentiation and fixed qualitydependent costs," Economics Discussion Paper Series 1015, Economics, The University of Manchester.
    4. Chatterjee, Susmita & Datta, Debabrata & Banerjee, Ranjan, 2016. "Performance of mixed oligopoly model in the context of Indian telecom industry," MPRA Paper 72949, University Library of Munich, Germany.
    5. Blind, Knut & Müller, Jo-Ann, 2019. "The role of standards in the policy debate on the EU-US trade agreement," Journal of Policy Modeling, Elsevier, vol. 41(1), pages 21-38.
    6. Stefan Lutz & Mario Pezzino, 2014. "Vertically Differentiated Mixed Oligopoly with Quality-dependent Fixed Costs," Manchester School, University of Manchester, vol. 82(5), pages 596-619, September.

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    More about this item

    Keywords

    product differentiation; oligopoly; trade; quality standards; policy coordination;
    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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