Abstract
Imposing a minimum quality standard (MQS) is conventionally regarded as harmful if firms compete in quantities. This, however, ignores its possible dynamic effects. We show that an MQS can hinder collusion, resulting in dynamic welfare gains that reduce and may outweigh the static losses which are caused by regulation’s distortive effect on equilibrium qualities.
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Napel, S., Oldehaver, G. A dynamic perspective on minimum quality standards under Cournot competition. J Regul Econ 39, 29–49 (2011). https://doi.org/10.1007/s11149-010-9140-1
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DOI: https://doi.org/10.1007/s11149-010-9140-1