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Minimum Quality Standards as Facilitating Devices: An Example with Leapfrogging and Exit

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  • Lutz, Stefan

Abstract

The recent extensive study of vertical product differentiation models has allowed for the analysis of international trade issues in the presence of country asymmetries in terms of product qualities, technology, costs, market size, and income. In the presence of such asymmetries, national industries will either be market leaders or be lagging behind in the international market place in terms of their product qualities. The resulting asymmetry in profits creates powerful incentives for lagging industries as well as their national governments to reverse this situation to their advantage, i.e. to induce ‘leapfrogging’ in terms of product qualities. This note presents an example where a minimum quality standard facilitates leapfrogging as well as exit of the foreign firm.

Suggested Citation

  • 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.
  • Handle: RePEc:cpr:ceprdp:1522
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    Citations

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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. Kuhn, Michael, 2007. "Minimum quality standards and market dominance in vertically differentiated duopoly," International Journal of Industrial Organization, Elsevier, vol. 25(2), pages 275-290, April.
    3. Michael Kuhn, "undated". "Low Quality Leadership in Vertically Differentiated Duopoly," Discussion Papers 00/38, Department of Economics, University of York.
    4. S Lutz, 2005. "Regulatory Standards Can Lead to Predation," The School of Economics Discussion Paper Series 0509, Economics, The University of Manchester.

    More about this item

    Keywords

    Country Asymmetries; Leapfrogging; Oligopoly; Quality; Trade; Vertical Product Differentiation;

    JEL classification:

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

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