The Effect of Quotas on Domestic Product Price and Quality
A quota on foreign competition generally leads to quality upgrading (downgrading) of the low-quality (high-quality) firm, an increase in average quality, a reduction of quality differentiation, and a reduction of domestic consumer surplus, irrespective of whether the foreign firm produces higher or lower quality. Effects of a quota on industry profits and domestic welfare depend on the direction of international vertical differentiation. If the foreign firm produces low quality, both firms’ prices and profits rise but domestic welfare falls. This describes well some major effects of a Japanese Voluntary Export Restraint (VER) in the U.S. auto market and relevant empirical findings. If the foreign firm produces high quality, foreign profits will fall. Since domestic consumer surplus falls only unsubstantially, domestic profit gains lead to an increase of domestic welfare. Copyright International Atlantic Economic Society 2005
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 11 (2005)
Issue (Month): 2 (May)
|Contact details of provider:|| Web page: http://www.springer.com|
Postal:Suite 650, International Tower, 229 Peachtree Street, N.E., Atlanta, GA 30303
Phone: (404) 965-1555
Fax: (404) 965-1556
Web page: http://www.iaes.org/
More information through EDIRC
|Order Information:||Web: http://www.springer.com/economics/journal/11294|
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.:
- Boccard, N. & Wauthy, X., 1998.
"Import Restraints and Quality Choice Under Vertical Differentiation,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1998008, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- BOCCARD, Nicolas & WAUTHY, Xavier, 1998. "Import restraints and quality choice under vertical differentiation," CORE Discussion Papers 1998018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
- Goldberg, Penny Koujianou, 1994. "Trade policies in the U.S. automobile industry," Japan and the World Economy, Elsevier, vol. 6(2), pages 175-208, June.
- Motta, Massimo, 1993. "Endogenous Quality Choice: Price vs. Quantity Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 113-131, June.
- Robert C. Feenstra, 1988. "Quality Change Under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, Oxford University Press, vol. 103(1), pages 131-146.
- 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 1328-1346, December.
- Lutz, Stefan, 1998. "Can taxing foreign competition harm the domestic industry?," ZEI Working Papers B 15-1998, University of Bonn, ZEI - Center for European Integration Studies.
- Richard Harris, 1985. "Why Voluntary Export Restraints Are 'Voluntary.'," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 799-809, November.
- Richard Harris, 1984. "Why Voluntary Export Restraints are 'Voluntary'," Working Papers 559, Queen's University, Department of Economics.
- Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August.
- Krishna, Kala, 1989. "Trade restrictions as facilitating practices," Journal of International Economics, Elsevier, vol. 26(3-4), pages 251-270, May.
- Kala Krishna, 1985. "Trade Restrictions as Facilitating Practices," NBER Working Papers 1546, National Bureau of Economic Research, Inc.
- Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
- 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.
- Petrakis, Emmanuel & Kujal, Praveen & Herguera, Iñigo, 1994. "Quantity restrictions and endogeneous quality choice," UC3M Working papers. Economics 2969, Universidad Carlos III de Madrid. Departamento de Economía.
- Aw, Bee Yan & Roberts, Mark J., 1986. "Measuring quality change in quota-constrained import markets: The Case of U.S. Footwear," Journal of International Economics, Elsevier, vol. 21(1-2), pages 45-60, August.
- Feenstra, R.C., 1993. "Measuring the Welfare Effects of Quality Change: Theory and Application to Japaneese Autos," Papers 93-15, California Davis - Institute of Governmental Affairs.
- Anderson, James E, 1985. "The Relative Inefficiency of Quotas: The Cheese Case," American Economic Review, American Economic Association, vol. 75(1), pages 178-190, March.
- Feenstra, Robert C., 1985. "Automobile prices and protection: The U.S.-Japan trade restraint," Journal of Policy Modeling, Elsevier, vol. 7(1), pages 49-68.
- Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
- Deneckere, R.J. & Kovenock, D. & Sohn, Y.Y., 1991. "Quotas and Tariffs with Endogenous Conduct," Purdue University Economics Working Papers 1006, Purdue University, Department of Economics.
- Choi, Chong Ju & Shin, Hyun Song, 1992. "A Comment on a Model of Vertical Product Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 229-231, June.
- Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
- Robert C. Feenstra, 1993. "Measuring the Welfare Effect of Quality Change: Theory and Application of Japanese Autos," NBER Working Papers 4401, National Bureau of Economic Research, Inc.
- 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 1105-1114, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:iaecre:v:11:y:2005:i:2:p:163-173:10.1007/s11294-005-3013-x. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.