Quantity Restrictions and Endogenous Quality Choice
AbstractIn a vertical product differentiation model under Cournot competition both foreign and domestic firms respond by lowering their investment in long-run quality for a quantity restriction at, and in the neighborhood of, the free trade import level. Average quality increases only when the low-quality foreign firm faces a substantially restrictive quota/voluntary export restraint. The change in quality depends on whether the foreign firm is of high or low quality and upon the restrictiveness of the quota. The imposition of quantity restrictions has important strategic effects on the long-run choice of quality.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/5333.
Length: 1279 p.
Date of creation: Dec 2000
Date of revision:
Publication status: Published in The International Journal of Industrial Organization (2000-12) v. 18, p.1259-1277
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Vertically differentiation; Quotas; VERs; Quality downgrading;
Other versions of this item:
- Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2000. "Quantity restrictions and endogenous quality choice," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1259-1277, December.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
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