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Garella, Paolo G.
(2004)
Are "innocuous" Minimum Quality Standards really innocuous?
Bologna:
Dipartimento di Scienze economiche DSE,
p. 6.
DOI 10.6092/unibo/amsacta/4777.
In: Quaderni - Working Paper DSE
(515).
ISSN 2282-6483.
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Abstract
The present note shows that ”innocuous” Minimum Quality Standards, namely standards that are below the lowest quality level observed in the market, may have effects on equilibrium outcomes. In particular this is true in a duopoly where one high quality firm invests in R&D to lower its cost of quality improvements. A Standard that is below, but close to, the lowest quality observed in the market reduces the incentive to invest by the quality leading firm.
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