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Quality Competition in Markets with Regulated Prices and Minimum Quality Standards

31 Pages Posted: 4 Mar 2013  

Roberto Cellini

University of Catania - Department of Economics and Business

Fabio G. Lamantia

University of Calabria - Department of Economics, Statistics and Finance; University of Manchester

Date Written: March 4, 2013

Abstract

We study the equilibrium and its stability property in a duopoly market in which minimum quality standards (MQS) are set, prices are regulated with links to product quality, and firms compete in quality. The adjustment dynamics are taken into account. We focus on the role that MQS play, in affecting equilibrium allocations and the system dynamic properties. In particular, we show that chaotic dynamics may emerge, precisely due to MQS; under specific circumstances, MQS are responsible for the outcome of maximal differenciation in product qualities across providers.

Keywords: Oligopoly, Quality competition, Minimum quality standard

JEL Classification: C73, H42, I18, L13

Suggested Citation

Cellini, Roberto and Lamantia, Fabio G., Quality Competition in Markets with Regulated Prices and Minimum Quality Standards (March 4, 2013). Available at SSRN: https://ssrn.com/abstract=2228262 or http://dx.doi.org/10.2139/ssrn.2228262

Roberto Cellini (Contact Author)

University of Catania - Department of Economics and Business ( email )

Corso Italia 55
95129 Catania, 95129
Italy
+390957537728 (Phone)
+390957537710 (Fax)

Fabio G. Lamantia

University of Calabria - Department of Economics, Statistics and Finance ( email )

Via P. Bucci
Rende, CS I-87036
Italy

HOME PAGE: http://fabiolamantia.altervista.org/

University of Manchester ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

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