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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
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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 

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Footnotes

**

Department of Economics, University of Bologna Strada Maggiore 45,40125 Bologna, Italy. Fax:+39-051-2092664 E-mail [email protected]

*

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

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