Premium
International Strategic Choice of Minimum Quality Standards and Welfare*
Author(s) -
LUTZ STEFAN,
PEZZINO MARIO
Publication year - 2012
Publication title -
jcms: journal of common market studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.54
H-Index - 90
eISSN - 1468-5965
pISSN - 0021-9886
DOI - 10.1111/j.1468-5965.2011.02241.x
Subject(s) - harmonization , mutual recognition , welfare , quality (philosophy) , set (abstract data type) , economics , microeconomics , product (mathematics) , sequential equilibrium , product differentiation , game theory , strategic choice , quality standard , public economics , international trade , equilibrium selection , industrial organization , computer science , repeated game , mathematics , chemistry , acoustics , geometry , epistemology , chromatography , market economy , programming language , physics , philosophy
This article looks at the influence of minimum quality standards in a two‐region partial‐equilibrium model of vertical product differentiation and trade. Three alternative standard‐setting arrangements are considered: full harmonization, national treatment and mutual recognition. The analysis integrates the choice of a particular standard‐setting alternative by governments into the model. The article provides a set of sufficient conditions for which mutual recognition emerges as one regulatory alternative that always improves welfare in both regions. Mutual recognition, being the default procedure if governments do not reach a unanimous decision, is the only possible equilibrium of the game.