File(s) not publicly available
Vertical product differentiation, minimum quality standards and international trade
journal contribution
posted on 2023-06-08, 08:43 authored by Dimitra PetropoulouThis paper develops a two-country, vertically differentiated duopoly model so as to analyse incentives for the formulation of national minimum quality standards in an open economy setting. Markets are segmented and national firms compete in both markets forming an international duopoly. Firms incur quality-dependent variable costs and goods sold domestically and abroad can have distinct qualities, while national quality standards are endogenously determined. International trade links give rise to cross-country externalities that result in inefficient national quality standards, either too lax or too tough relative to the global welfare-maximising international standard. Trade flows are shown to be lower under Nash equilibrium minimum standards than under world optimum standards. Moreover, if firms specialise in goods of different quality levels, then world optimum standards are unattainable through reciprocal adjustments in national standards, in the absence of lump sum transfers. This suggests limitations in the effectiveness of international negotiations over minimum quality standards.
History
Publication status
- Published
Journal
Oxford Economic PapersISSN
1471-0498Publisher
Oxford University PressExternal DOI
Issue
2Volume
65Page range
372-393Department affiliated with
- Economics Publications
Full text available
- No
Peer reviewed?
- Yes
Editors
S DrLegacy Posted Date
2012-05-22Usage metrics
Categories
No categories selectedKeywords
Licence
Exports
RefWorks
BibTeX
Ref. manager
Endnote
DataCite
NLM
DC