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Enforcing domestic quality dominance through quotas

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  • BOCCARD, Nicolas
  • WAUTHY, Xavier

Abstract

We study duopoly competition between a domestic and a foreign firm who first choose their quality and then compete in prices in the domestic market. As is well known, the free‐trade equilibrium exhibits quality differentiation and indeterminacy of the quality leader. We show that an import quota can enforce, as the unique subgame‐perfect equilibrium outcome, the quality ranking that favors the domestic producer and thereby can increase domestic welfare.
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Suggested Citation

  • BOCCARD, Nicolas & WAUTHY, Xavier, 2005. "Enforcing domestic quality dominance through quotas," LIDAM Reprints CORE 1756, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1756
    DOI: 10.1111/j.1467-9396.2005.00502.x
    Note: In : Review of International Economics, 13(2), 250-261, 2005
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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, April.
    2. 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.
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    Cited by:

    1. Claire Chambolle & Eric Giraud‐Héraud, 2005. "Certification of Origin as a Non‐Tariff Barrier," Review of International Economics, Wiley Blackwell, vol. 13(3), pages 461-471, August.
    2. Hodaka Morita & Xuan Nguyen, 2012. "FDI and Technology Spillovers under Vertical Product Di erentiation," Discussion Papers 2012-19, School of Economics, The University of New South Wales.
    3. Eaton, Derek, 2015. "Innovation and IPRs for Agricultural Crop Varieties as Intermediate Goods," 2015 Conference, August 9-14, 2015, Milan, Italy 211581, International Association of Agricultural Economists.
    4. Morita, Hodaka & Nguyen, Xuan, 2021. "FDI and quality-enhancing technology spillovers," International Journal of Industrial Organization, Elsevier, vol. 79(C).
    5. Emanuele Bacchiega & Antonio Minniti & Arsen Palestini, 2016. "Quality, distance and trade: A strategic approach," Papers in Regional Science, Wiley Blackwell, vol. 95, pages 165-191, March.
    6. Elodie Rouviere & Raphael Soubeyran, 2011. "Competition vs. quality in an industry with imperfect traceability," Economics Bulletin, AccessEcon, vol. 31(4), pages 3052-3067.
    7. Nguyen, Xuan & Chao, Chi-Chur, 2021. "Revenge consumption, product quality, and welfare," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 495-501.
    8. Rouviere, Elodie & Soubeyran, Raphael, 2008. "Collective Reputation, Entry and Minimum Safety Standard," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44465, European Association of Agricultural Economists.
    9. Derek Eaton, 2013. "Innovation and IPRs in the Agricultural Seed Sector," CIES Research Paper series 19-2013, Centre for International Environmental Studies, The Graduate Institute.
    10. Munirul H. Nabin & Xuan Nguyen & Pasquale M. Sgro, 2013. "Technology Transfer, Quality Standards, and North–South Trade," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 783-796, September.
    11. Hong, Xianpei & Zhou, Menghuan & Gong, Yeming, 2021. "Dilemma of quality information disclosure in technology licensing," European Journal of Operational Research, Elsevier, vol. 294(2), pages 543-557.
    12. Xuan Nguyen & Pasquale Sgro & Munirul Nabin, 2017. "Optimal Licensing Policy under Vertical Product Differentiation," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 497-510, August.
    13. Nabin, Munirul H. & Nguyen, Xuan & Sgro, Pasquale M. & Chao, Chi-Chur, 2014. "Strategic quality competition, mixed oligopoly and privatization," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 142-150.
    14. Nguyen, Xuan & Sgro, Pasquale & Nabin, Munirul, 2014. "Licensing under vertical product differentiation: Price vs. quantity competition," Economic Modelling, Elsevier, vol. 36(C), pages 600-606.
    15. Olivier Bonroy & Christos Constantatos, 2005. "Minimum Quality Standards and Equilibrium Selection with Asymmetric Firms," Industrial Organization 0506009, University Library of Munich, Germany.
    16. Elodie Rouviere & Raphael Soubeyran, 2011. "Competition vs. quality in an industry with imperfect traceability," Economics Bulletin, AccessEcon, vol. 31(4), pages 3052-3067.
    17. Eaton, Derek, 2014. "A model of IPRs in the international supply chain of seeds and agricultural production," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182643, European Association of Agricultural Economists.

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