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Economic Integration, Quality Choice, and Monopoly

Author

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  • Tsuyoshi Toshimitsu

    (School of Economics, Kwansei Gakuin University)

Abstract

Applying a standard model of endogenous quality choice to the case of multiple national markets (i.e., a developed and a less developed country), we consider the effect of an economic integration (i.e., a movement from segmented markets into a single integrated market through the removal of trade barriers) on price, quality, and consumer surplus. We show that the effect depends on the difference between the consumer distributions of the two countries and the degree of trade barrier costs. In particular, if the difference between the consumer distributions of them is large (small) and/or the degree of trade barrier costs is low (high), an economic integration decreases (increases) the quality level and the welfare of the two countries.

Suggested Citation

  • Tsuyoshi Toshimitsu, 2014. "Economic Integration, Quality Choice, and Monopoly," Discussion Paper Series 118, School of Economics, Kwansei Gakuin University, revised May 2014.
    • Handle: RePEc:kgu:wpaper:118
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    File URL: http://192.218.163.163/RePEc/pdf/kgdp118.pdf
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    References listed on IDEAS

    as
    1. Malueg, David A. & Schwartz, Marius, 1994. "Parallel imports, demand dispersion, and international price discrimination," Journal of International Economics, Elsevier, vol. 37(3-4), pages 167-195, November.
    2. Baldwin, Richard E. & Venables, Anthony J., 1995. "Regional economic integration," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 31, pages 1597-1644, Elsevier.
    3. Layson, Stephen K, 1994. "Market Opening under Third-Degree Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 42(3), pages 335-340, September.
    4. Donald J. Wright, 2003. "Some Economics of Integrated and Segmented Markets," Review of International Economics, Wiley Blackwell, vol. 11(1), pages 72-89, February.
    5. Ikeda, Takeshi & Toshimitsu, Tsuyoshi, 2010. "Third-degree price discrimination, quality choice, and welfare," Economics Letters, Elsevier, vol. 106(1), pages 54-56, January.
    6. Stefan Szymanski & Tommaso Valletti, 2005. "Parallel trade, price discrimination, investment and price caps [‘First report (final) to the Committee on International Trade Law of the International Law Association on the subject of parallel im," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 20(44), pages 706-749.
    7. Jota Ishikawa, 2004. "From Segmented Markets to Integrated Markets: an Analysis of Economic Integration and Antidumping Legislation," Review of International Economics, Wiley Blackwell, vol. 12(4), pages 706-722, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    segmented market; integrated market; trade barrier costs; economic integration; price discrimination; uniform price; quality choice; demand dispersion; monopoly;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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