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A dynamic perspective on minimum quality standards under Cournot competition

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  • Stefan Napel

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  • Gunnar Oldehaver

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Abstract

Imposing a minimum quality standard (MQS) is conventionally regarded as harmful if firms compete in quantities. This, however, ignores its possible dynamic effects. We show that an MQS can hinder collusion, resulting in dynamic welfare gains that reduce and may outweigh the static losses which are caused by regulation's distortive effect on equilibrium qualities. Verdicts on MQS thus depend even more on the market structure at hand than has been acknowledged.
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Suggested Citation

  • Stefan Napel & Gunnar Oldehaver, 2011. "A dynamic perspective on minimum quality standards under Cournot competition," Journal of Regulatory Economics, Springer, vol. 39(1), pages 29-49, February.
  • Handle: RePEc:kap:regeco:v:39:y:2011:i:1:p:29-49 DOI: 10.1007/s11149-010-9140-1
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    Cited by:

    1. Rockett, Katharine, 2012. "Perspectives on the knowledge-based society: An introduction to the special issue," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages =1-22.
    2. Min Chen & Konstantinos Serfes, 2012. "Minimum quality standard regulation under imperfect quality observability," Journal of Regulatory Economics, Springer, vol. 41(2), pages 269-291, April.
    3. Peter Michaelis & Thomas Ziesemer, 2015. "On dynamic standards for energy efficiency in differentiated duopoly," Discussion Paper Series 325, Universitaet Augsburg, Institute for Economics.

    More about this item

    Keywords

    Minimal quality standard; Cournot competition; Collusion; L41; L51; L15; D43;

    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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