IDEAS home Printed from https://ideas.repec.org/p/hhs/sdueko/2017_001.html
   My bibliography  Save this paper

Mutual Recognition for Sale: International Bargaining over Product Standards

Author

Listed:

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.

Suggested Citation

  • Cai, Dapeng & Jørgensen, Jan Guldager, 2017. "Mutual Recognition for Sale: International Bargaining over Product Standards," Discussion Papers on Economics 1/2017, University of Southern Denmark, Department of Economics.
    • Handle: RePEc:hhs:sdueko:2017_001
    as

    Download full text from publisher

    File URL: http://www.sdu.dk/-/media/files/om_sdu/institutter/ivoe/disc_papers/disc_2017/dpbe1_2017.pdf?la=en
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maggie Xiaoyang Chen & Aaditya Mattoo, 2008. "Regionalism in standards: good or bad for trade?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 838-863, August.
    2. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    3. Stoyanov, Andrey, 2009. "Trade policy of a free trade agreement in the presence of foreign lobbying," Journal of International Economics, Elsevier, vol. 77(1), pages 37-49, February.
    4. repec:wly:soecon:v:81:2:y:2014:p:489-505 is not listed on IDEAS
    5. Daniel Sturm, 2006. "Product standards, trade disputes, and protectionism," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 564-581, May.
    6. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
    7. Gianluca Orefice & Nadia Rocha, 2014. "Deep Integration and Production Networks: An Empirical Analysis," The World Economy, Wiley Blackwell, vol. 37(1), pages 106-136, January.
    8. Togan, Sübidey, 2015. "Technical Barriers to Trade : The case of Turkey and the European Union," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 30, pages 121-148.
    9. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    10. Huw Edwards & Joanna Poyago-Theotoky, 2013. "Regulatory Protection When Firms Decide First on Technical Collaboration and R&D," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 750-764, September.
    11. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    12. Jacques Pelkmans, 2012. "Mutual Recognition: Economic and Regulatory Logic in Goods and Services," Chapters, in: Thomas Eger & Hans-Bernd Schäfer (ed.), Research Handbook on the Economics of European Union Law, chapter 6, Edward Elgar Publishing.
    13. Swinnen,Johan & Deconinck,Koen & Vandemoortele,Thijs & Vandeplas,Anneleen, 2015. "Quality Standards, Value Chains, and International Development," Cambridge Books, Cambridge University Press, number 9781107025912, January.
    14. Hideo Konishi & Kamal Saggi & Shlomo Weber, 2023. "Endogenous trade policy under foreign direct investment," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 23, pages 523-542, World Scientific Publishing Co. Pte. Ltd..
    15. Nuno Limão & Patricia Tovar, 2018. "Policy choice: Theory and evidence from commitment via international trade agreements," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 6, pages 179-198, World Scientific Publishing Co. Pte. Ltd..
    16. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
    17. Baccini, Leonardo & Urpelainen, Johannes, 2012. "Strategic side payments: preferential trading agreements, economic reform, and foreign aid," LSE Research Online Documents on Economics 45057, London School of Economics and Political Science, LSE Library.
    18. Jacques Pelkmans, 2012. "Mutual Recognition: economic and regulatory logic in goods and services," Bruges European Economic Research Papers 24, European Economic Studies Department, College of Europe.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jørgensen, Jan Guldager & Schröder, Philipp J.H., 2014. "Harmonization versus Mutual Recognition: Some pitfalls for the coordination of product standards under imperfect competition," Discussion Papers on Economics 23/2014, University of Southern Denmark, Department of Economics.
    2. Olper, Alessandro, 2017. "The political economy of trade-related regulatory policy: environment and global value chain," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 5(3), February.
    3. Nuno Limão, 2016. "Preferential Trade Agreements," NBER Working Papers 22138, National Bureau of Economic Research, Inc.
    4. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    5. Staiger, Robert & Bagwell, Kyle & Bown, Chad, 2015. "Is the WTO Passé?," CEPR Discussion Papers 10672, C.E.P.R. Discussion Papers.
    6. Ruckteschler, Christian & Malik, Adeel & Eibl, Ferdinand, 2022. "Politics of trade protection in an autocracy: Evidence from an EU tariff liberalization in Morocco," European Journal of Political Economy, Elsevier, vol. 71(C).
    7. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    8. Joseph S Shapiro, 2021. "The Environmental Bias of Trade Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 831-886.
    9. Dapeng Cai & Jie Li, 2018. "North–South Negotiations on Emission Reductions: A Bargaining Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 71(1), pages 157-177, September.
    10. Tobias D. Ketterer, 2016. "EU Anti-dumping and Tariff Cuts: Trade Policy Substitution?," The World Economy, Wiley Blackwell, vol. 39(5), pages 576-596, May.
    11. Johan Swinnen & Alessandro Olper & Senne Vandevelde, 2021. "From unfair prices to unfair trading practices: Political economy, value chains and 21st century agri‐food policy," Agricultural Economics, International Association of Agricultural Economists, vol. 52(5), pages 771-788, September.
    12. Kim, Young-Han & Kim, Sang-Kee, 2012. "Welfare effects of competitive lobbying efforts in international oligopoly markets," Economic Modelling, Elsevier, vol. 29(3), pages 614-620.
    13. Brou Daniel & Ruta Michele, 2013. "A Commitment Theory of Subsidy Agreements," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 13(1), pages 239-270, January.
    14. Stoyanov, Andrey & Yildiz, Halis Murat, 2015. "Preferential versus multilateral trade liberalization and the role of political economy," European Economic Review, Elsevier, vol. 80(C), pages 140-164.
    15. Blanchard, Emily J., 2010. "Reevaluating the role of trade agreements: Does investment globalization make the WTO obsolete?," Journal of International Economics, Elsevier, vol. 82(1), pages 63-72, September.
    16. Giovanni Maggi & Monika Mrázová & J. Peter Neary, 2022. "Choked By Red Tape? The Political Economy Of Wasteful Trade Barriers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(1), pages 161-188, February.
    17. Foletti, Liliana & MILE 02, Anirudh Shingal, 2014. "Stricter regulation boosts exports: the case of Maximum Residue Levels in pesticides," Papers 836, World Trade Institute.
    18. Andrey Stoyanov, 2016. "Regional Trade Agreements and Cross-border Lobbying: Empirical Evidence from the Canada–US Free Trade Agreement Negotiations," Review of International Economics, Wiley Blackwell, vol. 24(1), pages 126-149, February.
    19. Polk, Andreas & Schmutzler, Armin & Müller, Adrian, 2014. "Lobbying and the power of multinational firms," European Journal of Political Economy, Elsevier, vol. 36(C), pages 209-227.
    20. Maggi, Giovanni, 2020. "Anti-lobbying gains from international agreements," Journal of Monetary Economics, Elsevier, vol. 109(C), pages 20-34.

    More about this item

    Keywords

    Product standards; mutual recognition; harmonization; international bargaining; lobbying; horizontal differentiation;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:sdueko:2017_001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Astrid Holm Nielsen (email available below). General contact details of provider: https://edirc.repec.org/data/okioudk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.