Hostname: page-component-5c6d5d7d68-lvtdw Total loading time: 0 Render date: 2024-08-22T04:28:01.940Z Has data issue: false hasContentIssue false
  • English
  • Français

Endogenous Timing and Quality Standards in a Vertically Differentiated Duopoly*

Published online by Cambridge University Press:  17 August 2016

Giulio Ecchia  and
Luca Lambertini
Giulio Ecchia
Affiliation:
Faculty of Law, University of Foggia, Italy
Luca Lambertini
Affiliation:
Department of Economics, University of Bologna, Italy
Get access

Summary

The consequences of the adoption of quality standards on the endogenous timing of moves are investigated in a vertically differentiated duopoly. We obtain two main results. First, we prove that, when the low-quality firm is Stackelberg leader in the quality stage, the related MQS is ineffective. Second, the timing game in the quality space has a unique equilibrium in pure strategies, involving simultaneous moves. The related optimal MQS is time consistent, although suboptimal from the viewpoint of the regulator.

Résumé

Résumé

Les conséquences de l’adoption de critères de qualité sur le timing endogène de mouvements est étudié dans le cadre d’un duopole verticalement différencié. Nous obtenons deux résultats principaux. Nous montrons tout d’abord que quand la firme à qualité basse est leader de Stackelberg, la qualité standard minimale n’est pas efficace. Ensuite, le jeu de timing dans un espace de qualités a un équilibre à stratégies pures, impliquant des mouvements simultanés. La qualité standard minimale dans ce cas est cohérente dans le temps, même si elle est suboptimale pour le régulateur.

Keywords

Minimum Quality Standardextended gameendogenous timingL13L13
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 67 , Issue 2 , 2001 , pp. 119 - 130
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2001 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

**

Department of Economics, University of Bologna Strada Maggiore 45,40125 Bologna, Italy. Fax:+39-051-2092664 E-mail lamberti@spbo.unibo.i

*

We thank three anonymous referees and the audience at EARIE99 (Turin, September 4-7, 1999) for useful comments and discussion. The usual disclaimer applies.

References

Boom, A. (1995), “Asymmetric International Minimum Quality Standards and Vertical Differentiation”, Journal of Industrial Economics, 43, pp. 101–119.Google Scholar
Boyer, M. and Moreaux, M. (1987), “On Stackelberg Equilibria with Differentiated Products: The Critical Role of the Strategy Space”, Journal of Industrial Economics, 36, pp. 217–230.Google Scholar
Constantatos, C. and Perrakis, S. (1998), “Minimum Quality Standards, Entry, and the Timing of the Quality Decision”, Journal of Regulatory Economics, 13, pp. 47–58.Google Scholar
Crampes, C. and Hollander, A. (1995), “Duopoly and Quality Standards, European Economic Review, 39, pp. 71–82.Google Scholar
Cremer, H. and Thisse, J.-F. (1991), “Location Models of Horizontal Differentiation: A Special Case of Vertical Differentiation Models”, Journal of Industrial Economics, 39, pp. 383–390.Google Scholar
Cremer, H. and Thisse, J.-F. (1994), “Commodity Taxation in a Differentiated Oligopoly”, International Economic Remew, 35, pp. 613–633.Google Scholar
d’Aspremont, C. and Gérard-Varet, L.-A. (1980), “Stackelberg-Solvable Games and Pre-Play Communication”, Journal of Economic Theory, 23, pp. 201–217.Google Scholar
Dowrick, S. (1986), “von Stackelberg and Cournot Duopoly: Choosing Roles”, RAND Journal of Economics, 17, pp. 251–260.Google Scholar
Ecchia, G. and Lambertini, L. (1997), “Minimum Quality Standards and Collusion”, Journal of Industrial Economics, 45, pp. 101–113.Google Scholar
Gai-Or, E. (1985), “First Mover and Second Mover Advantages”, International Economic Review, 26, pp. 649–653.Google Scholar
Hamilton, J.H. and Slutsky, S.M. (1990), “Endogenous Timing in Duopoly Games: Stackelberg or Cournot Equilibria”, Games and Economic Behavior, 2, pp. 29–46.Google Scholar
Lambertini, L. (1996), “Choosing Roles in a Duopoly for Endogenously Differentiated Products”, Australian Economic Papers, 35, pp. 205–224.Google Scholar
Lambertini, L. (1997), “Time Consistency in Games of Timing”, Discussion paper 97–10, Institute of Economics, University of Copenhagen.Google Scholar
Lutz, S. (2000), “Trade Effects of Minimum Quality Standards With and Without Deterred Entry”, Journal of Economic Integration, 15, pp. 314–344.Google Scholar
Moorthy, K.S. (1988), “Product and Price Competition in a Duopoly”, Marketing Science, 7, pp. 141–168.Google Scholar
Motta, M. and Thisse, J.-F. (1993), “Minimum Quality Standards as an Environmental Policy”, Nota di lavoro 20.93, Fondazione ENI Enrico Mattei, Milan.Google Scholar
Ronnen, U. (1991), “Minimum Quality Standard, Fixed Costs, and Competition”, RAND Journal of Economics, 22, pp. 490–504.Google Scholar
Scarpa, C. (1998), “Minimum Quality Standards with More than Two Firms”, International Journal of Industrial Organization, 16, pp. 665–676.Google Scholar
Shaked, A. and Sutton, J. (1983), “Natural Oligopolies”, Econometrica, 51, pp. 1469–1483.Google Scholar
Viscusi, W.K., Vernon, J.M. and Harrington, J.E. Jr. (1995), Economics of Regulation and Antitrust, Cambridge, MA, MIT Press.Google Scholar