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

Stefan Napel () and Gunnar Oldehaver ()
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Gunnar Oldehaver: Department of Economics, University of Bayreuth

No 23, Discussion Papers from Aboa Centre for Economics

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.

Keywords: minimal quality standard; Cournot competition; collusion (search for similar items in EconPapers)
JEL-codes: L41 L51 L15 D43 (search for similar items in EconPapers)
Date: 2007-10
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