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Protection and the Product Line: Monopoly and Product Quality

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  • Kala Krishna

Abstract

Thereare three points made in this paper. The first is that the question concerning choice of a product line by a monopolist is similar in structure to other adverse selection problems -- and can be analyzed in an elementary way by adapting techniques recently developed for such problems. Such an analysis is developed in the first section. The second is that when a foreign monopolist produces a product line, protection will change the composition of the entire product line.The nature of such effects is studied in the second section and this analysis is greatly simplified by the results of the first sectton. In line with empirical work on the subject, quotas are shown to raise the average quality of imports, while the effects of tariffs are ambiguous.The third concerns the possibility of profit shifting protection which is welfare increasing. The welfare consequences of protection are analyzed in the third section, and are shown to depend crucially on the distribution of consumers.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1537.

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Date of creation: Jan 1985
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Publication status: published as International Economic Review Volume 31, No.1 Feb 1990
Handle: RePEc:nbr:nberwo:1537

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  1. Falvey, Rodney E, 1979. "The Composition of Trade within Import-restricted Product Categories," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1105-14, October.
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Citations

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Cited by:
  1. Luca Lambertini, 1995. "Intraindustry Trade Under Vertical Product Differentiation," Working Papers 233, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Kala Krishna, 1985. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc.
  3. Jose Luis Moraga-Gonzalez & Jean-Marie Viaene, 2003. "An Example of Procompetitive Trade Policies," Working Papers 504, Research Seminar in International Economics, University of Michigan.
  4. Robert C. Feenstra, 1986. "Gains from Trade in Differentiated Products: Japanese Compact Trucks," NBER Working Papers 1978, National Bureau of Economic Research, Inc.
  5. Jose Luis Moraga & Jean-Marie Viaene, 1999. "Endogenous Quality Effects of Trade Policy," Tinbergen Institute Discussion Papers 99-094/2, Tinbergen Institute.
  6. Moraga-Gonzalez, Jose Luis & Jean-Marie Viaene, 2002. "Procompetitive Trade Policies," Royal Economic Society Annual Conference 2002 141, Royal Economic Society.
  7. Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
  8. McCalman, Phillip, 2010. "Trade policy in a "super size me" world," Journal of International Economics, Elsevier, vol. 81(2), pages 206-218, July.
  9. Andaluz, Joaquin, 2000. "On protection and vertical product differentiation," Regional Science and Urban Economics, Elsevier, vol. 30(1), pages 77-97, January.
  10. L. Lambertini, 2002. "the Specialization of Production and Labour Mobility Under Endogenous Differentiation," Working Papers 453, Dipartimento Scienze Economiche, Universita' di Bologna.
  11. Ederington, Josh & McCalman, Phillip, 2013. "Technology adoption, government policy and tariffication," Journal of International Economics, Elsevier, vol. 90(2), pages 337-347.
  12. Claire Chambolle & Eric Giraud-Héraud, 2005. "Certification of Origin as a Non-Tariff Barrier," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 461-471, 08.
  13. Dungey, Mardi & Jacobs, Jan & Lestano, 2010. "Financial crises in Asia: concordance by asset market or country?," Working Papers 10575, University of Tasmania, School of Economics and Finance, revised 01 Nov 2010.

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