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A Dynamic Perspective on Minimum Quality Standards under Cournot Competition

  • Stefan Napel
  • Gunnar Oldehaver

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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File URL: http://www.bgpe.de/texte/DP/082_napel.pdf
File Function: First version, 2009
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Paper provided by Bavarian Graduate Program in Economics (BGPE) in its series Working Papers with number 082.

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Length: 35 pages
Date of creation: Sep 2009
Date of revision:
Handle: RePEc:bav:wpaper:082_napel
Contact details of provider: Web page: http://www.bgpe.de/

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