On tariff and quality innovation in a market with discrete preferences

Rajat Acharyya and Swapnendu Banerjee (Bandyopadhyay)

Economic Modelling, 2012, vol. 29, issue 3, 917-925

Abstract: In a market for a quality-differentiated good with heterogeneous set of consumers and a local firm facing competitive imports from abroad, we examine private and social incentives for quality innovation. For differential tariff regime, we show that both the private and social gains increase with the tariff protection for the low-quality segment of the domestic market for any given tariff on high-quality imports. But for some very high costs of innovation, the local firm may not undertake a socially desirable innovation. The pro-competitive effect, on the other hand, ensures that quality-distortion-at-the-bottom occurs only for very high levels of tariffs.

Keywords: Quality innovation; Tariff; Quality distortion; Social gain from innovation (search for similar items in EconPapers)
JEL-codes: F13 L12 L15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999311002896
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:29:y:2012:i:3:p:917-925

DOI: 10.1016/j.econmod.2011.12.012

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().