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Mutual Recognition of National Minimum Quality Standards may Support International Convergence

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Author Info
Lutz, Stefan

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Abstract

In a model of vertical product differentiation, duopolistic firms face qualitydependent costs and compete in 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. --

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Publisher Info
Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 03-17.

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Date of creation: 2003
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Handle: RePEc:zbw:zewdip:961

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Related research
Keywords: product differentiation; oligopoly; trade; quality standards;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Martinez-Giralt, Xavier & Pita Barros, Pedro Luis, 1997. "On the Effects of Anti-dumping Legislation," CEPR Discussion Papers 1590, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Lutz, Stefan, 1996. "Vertical Product Differentiation, Quality Standards, and International Trade Policy," CEPR Discussion Papers 1443, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Das, Satya P. & Donnenfeld, Shabtai, 1989. "Oligopolistic competition and international trade : Quantity and quality restrictions," Journal of International Economics, Elsevier, vol. 27(3-4), pages 299-318, November. [Downloadable!] (restricted)
  4. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
  5. Lutz, Stefan, 1996. "Trade Effects of Minimum Quality Standards with and without Deterred Entry," CEPR Discussion Papers 1384, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Cabrales, Antonio & Motta, Massimo & Thisse, Jacques-François, 1995. "On the Persistence of Leadership or Leapfrogging in International Trade," CEPR Discussion Papers 1106, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June. [Downloadable!] (restricted)
  8. Crampes, Claude & Hollander, Abraham, 1995. "Duopoly and quality standards," European Economic Review, Elsevier, vol. 39(1), pages 71-82, January. [Downloadable!] (restricted)
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  9. Lutz, Stefan, 1996. "Does Mutual Recognition of National Minimum Quality Standards Support Regional Convergence?," CEPR Discussion Papers 1385, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Motta, Massimo & Thisse, Jacques-Francois, 1994. "Does environmental dumping lead to delocation?," European Economic Review, Elsevier, vol. 38(3-4), pages 563-576, April. [Downloadable!] (restricted)
  11. Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter. [Downloadable!] (restricted)
  12. Motta, Massimo, 1992. "Sunk Costs and Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(412), pages 578-87, May. [Downloadable!] (restricted)
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  13. Shaked, Avner & Sutton, John, 1982. "Relaxing Price Competition through Product Differentiation," Review of Economic Studies, Blackwell Publishing, vol. 49(1), pages 3-13, January. [Downloadable!] (restricted)
  14. Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Blackwell Publishing, vol. 43(1), pages 101-19, March. [Downloadable!] (restricted)
  15. Leland, Hayne E, 1979. "Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1328-46, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mina Baliamoune & Stefan Lutz, 2009. "Preemption, Predation, and Minimum Quality Standards," ICER Working Papers 20-2009, ICER - International Centre for Economic Research. [Downloadable!]
  2. S Lutz, 2005. "Regulatory Standards Can Lead to Predation," The School of Economics Discussion Paper Series 0509, Economics, The University of Manchester. [Downloadable!]
  3. Donald MacLaren, 2004. "International Food Safety Standard and Processed Food Exports: Issues of Firm-Level Analysis," Department of Economics - Working Papers Series 905, The University of Melbourne. [Downloadable!]
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