On Tariff, Quality Choice and Innovation in a Vertically Differentiated Monopoly with Discrete Preferences
AbstractIn a vertically differentiated monopolistic framework with discrete preferences we examine how protecting the low-quality segment raises the incentive for quality innovation. We show how the monopolist facing competitive imports, might fail to exert its complete monopoly power even if there is prohibitive tariff on both the high and low quality segment of the market. On the other hand, given non prohibitive tariff on the high quality segment, the potential gain for the monopolist exhausts at a level much below the prohibitive low-quality tariff level. Also a sufficiently low tariff on the high quality product can force the monopolist to produce the first best qualities irrespective of the tariff level on the low quality product
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Bibliographic InfoPaper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0504.
Date of creation: 2005
Date of revision:
Protection; Quality Innovation; Discrete Types; Monopoly;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-08-04 (All new papers)
- NEP-BEC-2005-08-06 (Business Economics)
- NEP-COM-2005-08-09 (Industrial Competition)
- NEP-INO-2005-08-05 (Innovation)
- NEP-MIC-2005-08-07 (Microeconomics)
- NEP-TID-2005-08-05 (Technology & Industrial Dynamics)
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