The impact of a trade embargo on quality

Bryan McCannon

Economics Bulletin, 2004, vol. 6, issue 14, 1-7

Abstract: A trade embargo is a common way to punish a country. The question I ask is what effect does an embargo have on an imperfectly competitive market? I extend the standard quality duopoly model to show that if the embargo is on the high quality good the quality diminishes and causes an ambiguous effect on prices. An embargo on the low quality good raises the quality of the better good and increases both firm's price.

Keywords: punishment (search for similar items in EconPapers)
JEL-codes: F1 L5 (search for similar items in EconPapers)
Date: 2004-09-12
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