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Static Costs vs. Dynamic Benefits of a Minimum Quality Standard under Cournot Competition

Author

Listed:
  • Stefan Napel

    () (Department of Economics, University of Bayreuth)

  • Gunnar Oldehaver

    () (Department of Economics, University of Bayreuth)

Abstract

Imposing a minimum quality standard (MQS) is conventionally regarded as harmful if firms compete in quantities. This, however, ignores dynamic effects. We show that an MQS can hinder collusion, resulting in dynamic welfare gains that reduce and may even outweigh the usual static losses. Verdicts on MQS thus depend even more on the market at hand than has been acknowledged.

Suggested Citation

  • Stefan Napel & Gunnar Oldehaver, 2007. "Static Costs vs. Dynamic Benefits of a Minimum Quality Standard under Cournot Competition," Discussion Papers 23, Aboa Centre for Economics.
  • Handle: RePEc:tkk:dpaper:dp23
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    File URL: http://www.ace-economics.fi/kuvat/dp023.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    minimal quality standard; Cournot competition; collusion;

    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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