Quality competition in markets with regulated prices and minimum quality standards

Roberto Cellini and Fabio Lamantia ()

Journal of Evolutionary Economics, 2015, vol. 25, issue 2, 345-370

Abstract: We study the equilibrium and its stability property in a duopoly market in which minimum quality standards (MQS) are set, prices are regulated with links to product quality, and firms compete in quality. The adjustment dynamics are studied, under the assumption that quality is a sticky variable. We focus on the role that MQS play, in affecting equilibrium allocations and the system dynamic properties. In particular, we show that chaotic dynamics may emerge, precisely due to MQS; under specific circumstances, MQS are responsible for the outcome of maximal differentiation in product qualities across providers. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Oligopoly; Quality competition; Minimum quality standard; C73; H42; I18; L13 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (9)

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DOI: 10.1007/s00191-014-0383-3

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