Regulating quality: a comparison between minimum quality standards and mixed oligopoly

Journal title STUDI ECONOMICI
Author/s Iacopo Grassi
Publishing Year 2014 Issue 2013/109 Language English
Pages 20 P. 25-44 File size 157 KB
DOI 10.3280/STE2013-109002
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

This paper compares two possible State interventions in a market where a vertical differentiable good is produced: minimum quality standards (MQS) and mixed competition. In the analysis of MQS I consider an endogenous standard, given by the maximization of the Social Welfare, and the possibility for the firms not to respect such a standard, selling a low quality illegal good. In the study of the mixed oligopoly I concentrate the analysis on sectors where there might be separation between managers (who set the prices maximizing the profit) and employees (who set the quality maximizing the social welfare). The main result is that in these sectors the presence of the public firm allows to increase the Social Welfare with respect to the case when the good is produced by private firms or by a firm regulated with MQS.

Keywords: MQS, mixed oligopoly, quality, regulation, piracy.

Jel codes: L13, L50, H44

  1. Cremer H., Marchand M. and Thisse J.-F. (1989), The public firm as an instrument for regulating an oligopolistic market, Oxford Economic Papers, 41(2): 283-301.
  2. De Fraja G. and Delbono F. (1989), Alternative strategies of a public enterprise in oligopoly, Oxford Economic Papers, 41(2): 302-11.
  3. Delbono F., Denicolò V. and Scarpa C. (1991), Quality choice in a vertically differentiated mixed duopoly Working papers, Dipartimento Scienze Economiche, Università di Bologna.
  4. Ecchia G. and Lambertini L. (1997), Minimum quality standards and collusion, Journal of Industrial Economics, 45(1): 101-113.
  5. Lutz S. and Pezzino M. (2013), Vertically differentiated mixed oligopoly with qualitydependent fixed costs, The Manchester School (forthcoming).
  6. Ma C. and Burgess J. (1993), Quality competition, welfare, and regulation, Journal of Economics, 58(2): 153-173.
  7. Merril W. and Schneider N. (1966), Government firms in oligopoly industries, Quarterly Journal of Economics, 41: 113-131.
  8. Motta M. (1993), Endogenous quality choice: Price vs. quantity competition, Journal of Industrial Economics, 41(2): 113-131.
  9. Peitz M. and Waelbroeck P. (2006), Piracy of digital products: A critical review of the theoretical literature, Information Economics and Policy, 18(4): 449-476.
  10. Ronnen U. (1991), Minimum quality standards, fixed costs, and competition, RAND Journal of Economics, 22(4): 490-504.
  11. Shaked A. and Sutton J. (1982), Relaxing price competition through product differentiation, Review of Economic Studies, 49(1): 3-13.
  12. Spence A.M. (1975), Monopoly, quality, and regulation, Bell Journal of Economics, 6(2): 417-429.
  13. Tirole J. (1988), The Theory of Industrial Organization, vol. 1 of MIT Press Books, The MIT Press.
  14. Valletti T.M. (2000), Minimum quality standards under cournot competition, Journal of Regulatory Economics, 18(3): 235-245.

Iacopo Grassi, Regulating quality: a comparison between minimum quality standards and mixed oligopoly in "STUDI ECONOMICI " 109/2013, pp 25-44, DOI: 10.3280/STE2013-109002