Protection by Regulatory Standards: An Example with Forced Exit

NaUKMA Scientific Notes - Economics, Vol. 19, Fall 2001

Posted: 14 Jan 2003

See all articles by Stefan Lutz

Stefan Lutz

Lutz-Econ; HMKW University

Iñigo Herguera García

Universidad Complutense de Madrid (UCM) - Department of Fundamentals of Economic Analysis II (Quantitative Economics)

Abstract

The recent extensive study of vertical product differentiation models has allowed for the analysis of international trade issues in the presence of country asymmetries in terms of product qualities, technology, costs, market size, and income. In the presence of such asymmetries, national industries will either be market leaders or be lagging behind in the international market place in terms of their product qualities. The resulting asymmetry in profits creates powerful incentives for lagging industries as well as their national governments to reverse this situation to their advantage, i.e. to promote leadership in terms of product qualities. This note presents an example where a minimum quality standard facilitates increased product quality by the domestic firm as well as exit of the foreign firm.

Keywords: vertical product differentiation, oligopoly, trade, quality, country asymmetries

JEL Classification: F12, F13, L13

Suggested Citation

Lutz, Stefan and Lutz, Stefan and Herguera García, Iñigo, Protection by Regulatory Standards: An Example with Forced Exit. NaUKMA Scientific Notes - Economics, Vol. 19, Fall 2001, Available at SSRN: https://ssrn.com/abstract=343320

Stefan Lutz (Contact Author)

Lutz-Econ ( email )

Ringstrasse 6
Gernsheim, Hessen 64579
Germany
+4915146672069 (Phone)

HOME PAGE: http://lutz-econ.de

HMKW University ( email )

Department of Economics
Solmsstrasse 6
Frankfurt, Hessen 60486
Germany
+4915146672069 (Phone)

HOME PAGE: http://https://www.hmkw.de/

Iñigo Herguera García

Universidad Complutense de Madrid (UCM) - Department of Fundamentals of Economic Analysis II (Quantitative Economics) ( email )

Campus of Somosaguas
28223- Somosaguas, Madrid
Spain
(34) 91-394.23.62 (Phone)
(34) 91- 394.26.13 (Fax)

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