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Voluntary Export Restraints, Profits, and Quality Adjustment

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  • John C. Ries

Abstract

This paper develops a model of vertical differentiation to assess the impact of output constraints on the profits and quality choices of firms subject to them. A competitive environment is developed with the automobile industry in mind--multiproduct oligopolists producing differentiated goods who behave as Cournot competitors. The results show that an output constraint will not induce constrained firms to upgrade their product line when their unconstrained competitors produce higher quality models. It is also shown that an output constraint can raise the profits of constrained firms despite output increases by unconstrained firms.

Suggested Citation

  • John C. Ries, 1993. "Voluntary Export Restraints, Profits, and Quality Adjustment," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 688-706, August.
    • Handle: RePEc:cje:issued:v:26:y:1993:i:3:p:688-706
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    Cited by:

    1. Herguera, Inigo & Kujal, Praveen & Petrakis, Emmanuel, 2000. "Quantity restrictions and endogenous quality choice," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1259-1277, December.
    2. José Luis Moraga Gonzales & Jean-Marie Viaene, 2001. "Procompetitive Trade Policies," CESifo Working Paper Series 597, CESifo.
    3. Creane, Anthony, 2019. "Shipping the good apples under strategic competition," MPRA Paper 93744, University Library of Munich, Germany.
    4. Baylis, Katherine R., 2003. "Dispatches From The Tomato Wars: Spillover Effects Of Trade Barriers," Working Papers 15850, University of British Columbia, Food and Resource Economics.
    5. Zhou, Dongsheng & Spencer, Barbara J. & Vertinsky, Ilan, 2002. "Strategic trade policy with endogenous choice of quality and asymmetric costs," Journal of International Economics, Elsevier, vol. 56(1), pages 205-232, January.
    6. Moraga-Gonzalez, Jose Luis & Viaene, Jean-Marie, 2005. "Trade policy and quality leadership in transition economies," European Economic Review, Elsevier, vol. 49(2), pages 359-385, February.
    7. Beard, T. Randolph & Thompson, Henry, 2003. "Duopoly quotas and relative import quality," International Review of Economics & Finance, Elsevier, vol. 12(2), pages 275-281.
    8. José Luis Moraga Gonzales & Jean-Marie Viaene, 2001. "Trade and Industrial Policy of Transition Economies," CESifo Working Paper Series 446, CESifo.

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