Quotas and Quality in an International Duopoly

Sweeney, George; Thompson, Henry; Beard, T. Randolph

doi:1997.12.2.180

The Journal of Economic Integration 1997 June;12(2) :180-205.
DOI: https://doi.org/10.11130/jei.1997.12.2.180

Quotas and Quality in an International Duopoly

George Sweeney, Henry Thompson, T. Randolph Beard,

Auburn University
Vanderbilt University

ABSTRACT

This paper examines possible adjustments to a change in a binding quota in the context of an international duopoly. Consumers directly value embodied quality of goods, which is chosen simultaneously with quantity, and before quantity in a sequential model. Possible responses to a small change in a binding quota are derived. The same three types of equilibria occur in the simultaneous and sequential models. Foreign quality downgrading can occur if domestic quality falls, and is more likely starting with a low quantity of high quality imports. Domestic quality and quantity respond in opposite directions. Welfare effects are discussed.

REFERENCE

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3.	MacPhee, Craig R. [1974], Restrictions on International Trade in Steel, Lexington, Mass: Lexington.