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Mutual Recognition of National Minimum Quality Standards may Support International Convergence

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  • Stefan Lutz

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  • Mina Baliamoune-Lutz

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Abstract

In a model of vertical product differentiation, duopolistic firms face quality-dependent 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.

Suggested Citation

  • Stefan Lutz & Mina Baliamoune-Lutz, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 293-311, December.
  • Handle: RePEc:kap:jincot:v:3:y:2003:i:4:p:293-311
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    References listed on IDEAS

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    1. Lutz, Stefan, 1996. "Vertical Product Differentiation, Quality Standards, and International Trade Policy," CEPR Discussion Papers 1443, C.E.P.R. Discussion Papers.
    2. Crampes, Claude & Hollander, Abraham, 1995. "Duopoly and quality standards," European Economic Review, Elsevier, vol. 39(1), pages 71-82, January.
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    Cited by:

    1. Mina Baliamoune-Lutz & Stefan Lutz, 2010. "Pre-emption, Predation, and Minimum Quality Standards," International Economic Journal, Taylor & Francis Journals, vol. 24(1), pages 111-123.
    2. T. Huw Edwards, 2012. "Mutual Recognition versus National Treatment of Standards in a Classical Monopoly or Oligopoly," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 168(3), pages 455-487, September.
    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.
    4. S Lutz, 2005. "Regulatory Standards Can Lead to Predation," The School of Economics Discussion Paper Series 0509, Economics, The University of Manchester.
    5. Peter Michaelis & Thomas Ziesemer, 2015. "On dynamic standards for energy efficiency in differentiated duopoly," Discussion Paper Series 325, Universitaet Augsburg, Institute for Economics.
    6. Stefan Lutz & Mina Baliamoune-Lutz, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," Journal of Industry, Competition and Trade, Springer, vol. 3(4), pages 293-311, December.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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