Minimum Quality Standards and Exports

Birg, Laura; Voßwinkel, Jan S.

doi:10.2139/ssrn.2617210

Cited by 1 publication

(1 citation statement)

References 13 publications

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“…3 Except for its dynamic structure with an endogenous MQS and the use of a quadratic instead of a general cost function, our model basically resembles the approach presented by Crampes and Hollander (1995). 4 See, e.g., Motta (1993), Ecchia and Lambertini (1997), Napel and Oldehaver (2011), He (2014), Lutz and Pezzino (2014), Birg and Voßwinkel (2015) and Cavaliere and Crea (2017).…”

Section: The Modelmentioning

confidence: 99%

Minimum quality standards and benchmarking in differentiated duopoly

Michaelis

Ziesemer

2020

JER

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We study a two-period model of a duopoly with goods differentiated by quality. The periods' length corresponds to the goods' useful lifespan, and consumers are heterogeneous in their valuation of quality. In the second period, the regulator fixes a minimum quality standard based either on the quality supplied by the high-quality firm in the first period (strict regulation) or on the average quality supplied in the first period (average regulation). Assuming a covered market, we show that such an approach leads to decreasing qualities in the first period, and increasing qualities in the second one. In both periods, net utility aggregated over consumers is increasing and profits aggregated over firms are decreasing. Taken together, average regulation always leads to an increase in the present value of welfare, whereas strict regulation can cause a decline. If the discount factor exceeds a certain threshold, a policy based on average regulation is even superior to implementing the optimal minimum quality standard already in the first period.

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