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Protection and the Product Line: Monopoly and Product Quality

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)


NBER Working Paper No. w1537

Thereare three points made in this paper. The first is that the question concerning choice of a product line by a monopolist is similar in structure to other adverse selection problems -- and can be analyzed in an elementary way by adapting techniques recently developed for such problems. Such an analysis is developed in the first section. The second is that when a foreign monopolist produces a product line, protection will change the composition of the entire product line.The nature of such effects is studied in the second section and this analysis is greatly simplified by the results of the first sectton. In line with empirical work on the subject, quotas are shown to raise the average quality of imports, while the effects of tariffs are ambiguous.The third concerns the possibility of profit shifting protection which is welfare increasing. The welfare consequences of protection are analyzed in the third section, and are shown to depend crucially on the distribution of consumers.

Number of Pages in PDF File: 35

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Date posted: June 28, 2004  

Suggested Citation

Krishna, Kala, Protection and the Product Line: Monopoly and Product Quality (1985). NBER Working Paper No. w1537. Available at SSRN: http://ssrn.com/abstract=336294

Contact Information

Kala Krishna (Contact Author)
Pennsylvania State University - Department of Economics ( email )
523 Kern Graduate Building
University Park, PA 16802-3306
United States
814-865-1106 (Phone)
814-863-4775 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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