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Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation

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Standard

Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation. / Hansen, Jørgen Drud; Nielsen, Jørgen Ulff-Møller.

In: Journal of Economic Integration, Vol. 21, No. 4, December, 2006, p. 837-860.

Research output: Contribution to journal/Conference contribution in journal/Contribution to newspaperJournal articleResearchpeer-review

Harvard

Hansen, JD & Nielsen, JU-M 2006, 'Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation', Journal of Economic Integration, vol. 21, no. 4, December, pp. 837-860.

APA

Hansen, J. D., & Nielsen, J. U-M. (2006). Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation. Journal of Economic Integration, 21(4, December), 837-860.

CBE

MLA

Hansen, Jørgen Drud and Jørgen Ulff-Møller Nielsen. "Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation". Journal of Economic Integration. 2006, 21(4, December). 837-860.

Vancouver

Author

Hansen, Jørgen Drud ; Nielsen, Jørgen Ulff-Møller. / Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation. In: Journal of Economic Integration. 2006 ; Vol. 21, No. 4, December. pp. 837-860.

Bibtex

@article{6b672540dc5e11db8476000ea68e967b,
title = "Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation",
abstract = "This paper examines the effects of trade barriers on quality levels in a duopoly model for two countries with one producer in each country. The products are both vertically and horizontally differentiated. In absence of quality regulation, the two producers determine prices and quality levels in a two stage game. The firms choose the quality level in the first game, and their prices in the second game. The Nash equilibrium illustrates that the producer in the large country produces a higher quality than the producer in the small country. However, a reduction of the trade barrier twists the quality levels in favour of the small country. Furthermore, in case of implementation of a minimum quality standard, which forces the low quality producer from the small country to increase the quality level, the producer from the large country reacts strategically by lowering the quality level of his product. On the unregulated markets, integration increases welfare in both countries if they are almost of similar size. However, if the countries are very asymmetrical with respect to size, market integration may harm welfare in the large country. Welfare effects by introduction of minimum quality standards are also ambiguous depending on the parameters of the model.",
author = "Hansen, {J{\o}rgen Drud} and Nielsen, {J{\o}rgen Ulff-M{\o}ller}",
note = "Artiklen haves i ringbind p{\aa} L{\ae}sesalen - Research@asb",
year = "2006",
language = "English",
volume = "21",
pages = "837--860",
journal = "Journal of Economic Integration",
issn = "1225-651X",
publisher = "Center for International Economics, Sejong Institution, Sejong University",
number = "4, December",

}

RIS

TY - JOUR

T1 - Economic Integration and Quality Standards in a Duopoly Model with Horizontal and Vertical Product Differentiation

AU - Hansen, Jørgen Drud

AU - Nielsen, Jørgen Ulff-Møller

N1 - Artiklen haves i ringbind på Læsesalen - Research@asb

PY - 2006

Y1 - 2006

N2 - This paper examines the effects of trade barriers on quality levels in a duopoly model for two countries with one producer in each country. The products are both vertically and horizontally differentiated. In absence of quality regulation, the two producers determine prices and quality levels in a two stage game. The firms choose the quality level in the first game, and their prices in the second game. The Nash equilibrium illustrates that the producer in the large country produces a higher quality than the producer in the small country. However, a reduction of the trade barrier twists the quality levels in favour of the small country. Furthermore, in case of implementation of a minimum quality standard, which forces the low quality producer from the small country to increase the quality level, the producer from the large country reacts strategically by lowering the quality level of his product. On the unregulated markets, integration increases welfare in both countries if they are almost of similar size. However, if the countries are very asymmetrical with respect to size, market integration may harm welfare in the large country. Welfare effects by introduction of minimum quality standards are also ambiguous depending on the parameters of the model.

AB - This paper examines the effects of trade barriers on quality levels in a duopoly model for two countries with one producer in each country. The products are both vertically and horizontally differentiated. In absence of quality regulation, the two producers determine prices and quality levels in a two stage game. The firms choose the quality level in the first game, and their prices in the second game. The Nash equilibrium illustrates that the producer in the large country produces a higher quality than the producer in the small country. However, a reduction of the trade barrier twists the quality levels in favour of the small country. Furthermore, in case of implementation of a minimum quality standard, which forces the low quality producer from the small country to increase the quality level, the producer from the large country reacts strategically by lowering the quality level of his product. On the unregulated markets, integration increases welfare in both countries if they are almost of similar size. However, if the countries are very asymmetrical with respect to size, market integration may harm welfare in the large country. Welfare effects by introduction of minimum quality standards are also ambiguous depending on the parameters of the model.

M3 - Journal article

VL - 21

SP - 837

EP - 860

JO - Journal of Economic Integration

JF - Journal of Economic Integration

SN - 1225-651X

IS - 4, December

ER -