Pre-emption, Predation, and Minimum Quality Standards
We present a model of vertical product differentiation and exit where a domestic and a foreign firm face fixed setup costs and quality-dependent costs of production and compete in quality and price in the domestic market. Quality-dependent costs are quadratic in qualities, but independent of the quantities produced. The domestic government may impose a minimum quality standard binding for both foreign and domestic firms. In the presence of an initial cost advantage of the domestic firm, a sufficiently high minimum quality standard set by the domestic government will enable the domestic firm to induce exit of the foreign firm, i.e. to engage in predation. However, the same standard would lead to predation by the foreign firm, if the foreign firm had the initial cost advantage!
Volume (Year): 24 (2010)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RIEJ20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RIEJ20|
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.:
- Valletti, Tommaso M, 2000. "Minimum Quality Standards under Cournot Competition," Journal of Regulatory Economics, Springer, vol. 18(3), pages 235-45, November.
- Richard A. Posner, 1974.
"Theories of Economic Regulation,"
Bell Journal of Economics,
The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
- Constantatos, Christos & Perrakis, Stylianos, 1998. "Minimum Quality Standards, Entry, and the Timing of the Quality Decision," Journal of Regulatory Economics, Springer, vol. 13(1), pages 47-58, January.
- Ecchia, Giulio & Lambertini, Luca, 1997.
"Minimum Quality Standards and Collusion,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 45(1), pages 101-13, March.
- Crampes, C. & Hollander, A., 1991.
"Duopoly and Quality Standards,"
Cahiers de recherche
9128, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Lutz, Stefan & Lyon, Thomas P & Maxwell, John W, 2000. "Quality Leadership When Regulatory Standards Are Forthcoming," Journal of Industrial Economics, Wiley Blackwell, vol. 48(3), pages 331-48, September.
- Hallak, Juan Carlos, 2006. "Product quality and the direction of trade," Journal of International Economics, Elsevier, vol. 68(1), pages 238-265, January.
- Justin P. Johnson & David P. Myatt, 2003.
"Multiproduct Quality Competition: Fighting Brands and Product Line Pruning,"
American Economic Review,
American Economic Association, vol. 93(3), pages 748-774, June.
- David P. Myatt & Justin P. Johnson, 2002. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," Economics Series Working Papers 105, University of Oxford, Department of Economics.
- Paolo Garella, 2006.
""Innocuous" Minimum Quality Standards,"
0606, University of Crete, Department of Economics.
- Naoto Jinji & Tsuyoshi Toshimitsu, 2004. "Minimum Quality Standards under Asymmetric Duopoly with Endogenous Quality Ordering: A Note," Journal of Regulatory Economics, Springer, vol. 26(2), pages 189-199, 09.
- Boom, Anette, 1995. "Asymmetric International Minimum Quality Standards and Vertical Differentiation," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 101-19, March.
- 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.
- Donnenfeld, S. & Weber, S., 1991.
"Limit Qualities and Entry Deterrence,"
92-4, York (Canada) - Department of Economics.
- Daniel Sturm, 2001.
"Product standards, trade disputes and protectionism,"
LSE Research Online Documents on Economics
20134, London School of Economics and Political Science, LSE Library.
- Daniel Sturm, 2006. "Product standards, trade disputes, and protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 564-581, May.
- Daniel M. Sturm, 2001. "Product Standards, Trade Disputes and Protectionism," CEP Discussion Papers dp0486, Centre for Economic Performance, LSE.
- 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.
- Lutz, Stefan, 2003. "Mutual Recognition of National Minimum Quality Standards may Support International Convergence," ZEW Discussion Papers 03-17, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Tsuyoshi Toshimitsu & Naoto Jinji, 2008. "A Note on Strategic Trade Policy and Endogenous Quality Choice," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 173-185, 02.
- Manouchehr Mokhtari & Doha Abdelhamid, 2008. "Neocapture: regulatory competition in an open market world," International Economic Journal, Taylor & Francis Journals, vol. 22(1), pages 1-24.
- Uri Ronnen, 1991. "Minimum Quality Standards, Fixed Costs, and Competition," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 490-504, Winter.
- Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, Oxford University Press, vol. 106(4), pages 1089-1127.
- 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.
- Motta, Massimo & Thisse, Jacques-Francois & Cabrales, Antonio, 1997. "On the Persistence of Leadership or Leapfrogging in International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(4), pages 809-24, November.
- Motta, M. & Thisse,Â J.-F. & Cabrales, A., . "On the persistence of leadership or leapfrogging in international trade," CORE Discussion Papers RP 1287, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Massimo MOTTA & Jean-François THISSE & Antonio CABRALES, 1996. "On the Persistence of Leadership or Leapfrogging in International Trade," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9625, Université de Lausanne, Faculté des HEC, DEEP.
- Maxwell, John W., 1998. "Minimum quality standards as a barrier to innovation," Economics Letters, Elsevier, vol. 58(3), pages 355-360, March.
- Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2002. "Tariffs, quality reversals and exit in vertically differentiated industries," Journal of International Economics, Elsevier, vol. 58(2), pages 467-492, December.
- Hung, N. M. & Schmitt, Nicolas, 1988. "Quality competition and threat of entry in duopoly," Economics Letters, Elsevier, vol. 27(3), pages 287-292.
- Ralph Siebert, 1999.
"Credible Vertical Preemption,"
CIG Working Papers
FS IV 99-20, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG), revised Jul 2003.
- Donnenfeld, Shabtai & Weber, Shlomo, 1992. "Vertical product differentiation with entry," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 449-472, September.
- Phlips, Louis, 1996. "On the detection of collusion and predation," European Economic Review, Elsevier, vol. 40(3-5), pages 495-510, April.
- 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.
- Lutz, Stefan, 1996. "Minimum Quality Standards as Facilitating Devices: An Example with Leapfrogging and Exit," CEPR Discussion Papers 1522, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:24:y:2010:i:1:p:111-123. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.