Import Restraints and horizontal differentiation
(2000)
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cerec2000_2.pdf
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- Abstract
- We consider the impact of an import quota under price competition in the Hotelling model of horizontal product differentiation. Two issues are contemplated. First, we show that the main qualitative implication of the quota in a pricing game is to generate equilibrium outcomes quite similar to those prevailing under Cournot competition. In particular the optimal quota from the domestic point of view is invariant to the mode of competition. Second, we show how the presence of the quota affects the choice of products' attributes. When transportation costs are quadratic, the maximum differentiation principle does not hold for most values of the quota: by relaxing price competition, the quota reverses firms' incentives with respect to the choice of attributes.
- Affiliations
Citations
Boccard, N., & Wauthy, X. (2000). Import Restraints and horizontal differentiation (CEREC Working Papers 2000/2).