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The impact of a trade embargo on quality

Author

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  • Bryan McCannon

    (Elmira College)

Abstract

A trade embargo is a common way to punish a country. The question I ask is what effect does an embargo have on an imperfectly competitive market? I extend the standard quality duopoly model to show that if the embargo is on the high quality good the quality diminishes and causes an ambiguous effect on prices. An embargo on the low quality good raises the quality of the better good and increases both firm's price.

Suggested Citation

  • Bryan McCannon, 2004. "The impact of a trade embargo on quality," Economics Bulletin, AccessEcon, vol. 6(14), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-04f10006
    as

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    References listed on IDEAS

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    3. Gary Clyde Hufbauer & Kimberly Ann Elliott, 1999. "Same Song, Same Refrain? Economic Sanctions in the 1990's," American Economic Review, American Economic Association, vol. 89(2), pages 403-408, May.
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    JEL classification:

    • F1 - International Economics - - Trade
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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