International Coordination of Quality Standards and Vertical Product Differentiation

Stefan Lutz

No 03-41, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: I study the influence of minimum quality standards in a partial-equilibrium model of vertical product differentiation and trade in which duopolistic firms face quality-dependent costs and compete in quality and price in two segmented markets. Three alternative standard setting arrangements are Full Harmonization, National Treatment and Mutual Recognition. Under either alternative, standards can be found that increase welfare in both regions. The analysis integrates the choice of a particular standard setting alternative by governments into the model. Mutual Recognition emerges as one regulatory alternative that always improves welfare in both regions when compared to the case without regulation. Under certain cost conditions, both regions will prefer Mutual Recognition over all available alternatives.

Keywords: product differentiation; oligopoly; trade; quality standards; policy coordination (search for similar items in EconPapers)
JEL-codes: F12 F13 L13 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:1350

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