Mutual Recognition for Sale: International Bargaining over Product Standards

Dapeng Cai and Jan Jørgensen

No 1/2017, Discussion Papers on Economics from University of Southern Denmark, Department of Economics

Abstract: We model a two-country bargaining process over the coordination of a horizontally differentiated product standard. We show that the necessary conditions for bargaining to take place are (i) firm heterogeneity and (ii) sufficiently high complying costs. When firms compete à la Cournot in the Home market and when bargaining takes place, our results suggest that mutual recognition of standards, and not the harmonization of standards, inevitably emerges as Home’s optimal choice. We also demonstrate that mutual recognition can maximize global welfare. Our results largely hold when firms compete à la Bertrand.

Keywords: Product standards; mutual recognition; harmonization; international bargaining; lobbying; horizontal differentiation (search for similar items in EconPapers)
JEL-codes: C71 D72 F12 F13 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2017-01-06
New Economics Papers: this item is included in nep-bec, nep-com and nep-int
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