Enforcing domestic quality dominance through quotas

Boccard, Nicolas;Wauthy, Xavier
(2005) Review of International Economics — Vol. 13, n° 2, p. 250-261 (2005)

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We study duopoly competition between a domestic and a foreign firm who first choose their quality and then compete in prices in the domestic market. As is well known, the free-trade equilibrium exhibits quality differentiation and indeterminacy of the quality leader. We show that an import quota can enforce, as the unique subgame-perfect equilibrium outcome, the quality ranking that favors the domestic producer and thereby can increase domestic welfare. Copyright Blackwell Publishing Ltd 2005.
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Boccard, N., & Wauthy, X. (2005). Enforcing domestic quality dominance through quotas. Review of International Economics, 13(2), 250-261. https://doi.org/10.1111/j.1467-9396.2005.00502.x (Original work published 2005)