95 research outputs found
Minimum Quality Standard and Protectionism
We studied the protectionist character of a minimum quality standard (MQS). We show that in the fixed cost model where two firms, one local and one foreign, compete in a local market, the implementation of a MQS on the local market is a protectionist political only if the local firm supplies the lower quality, whatever the type of competition (Cournot or Bertrand) and the technology differential between the firms.Minimum Quality Standard, Protectionism, Endogenous Quality
Forward Vertical Integration: The Fixed-Proportion Case Revisited
Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost-predation and the profits of the fringe may increase. The output price falls and welfare unambiguously rises.
Consumer Uncertainty about which Firm Sells the High Quality: on the Slow Penetration of Some Credence Goods
In this paper, we analyze cases where consumers are aware of the existence of two qualities but do not know which firm sells the good one. We show that if the production of the high quality requires higher cost, its producer may be severly disadvantaged, even if the additional utility fully justifies the extra cost. We even show cases where all consumers beliefs are in favour of the efficient high quality producer, yet it is its inefficient rival that monopolizes the market! This result explains the slow penetration of some credence goods like environementally friendly products, organic vegetables, etc. It also makes an urgent call for labelling this kind of products.Incomplete information, quality, asymetric costs
Minimum Quality Standards and Equilibrium Selection with Asymmetric Firms
In a vertically differentiated market with cost asymmetries, the risk dominance criterion selects the equilibrium where the high quality is produced by the efficient firm. We show that a sufficiently high Minimum Quality Standard reverses equilibrium selection. Hence, MQS may be used in order to increase a domestic firm's profit at the expense of a more efficient foreign rival. This produces higher domestic and lower world welfare. Since the protectionist impact of MQS comes through equilibrium targeting rather than directly affecting equilibrium outcomes, it cannot be easily detected.Vertical product differentiation, Minimum quality standards, Equilibrium selection, Protectionism
Forward Vertical Integration: The Fixed-Proportion Case Revisited
Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost predation and the fringe firmsâ margin may even increase. The output price falls and welfare unambiguously rises.Vertical integration; cost predation; cost asymmetries
Le standard de qualité minimale est-il un instrument socialement optimal? Une revue de littérature
La littĂ©rature Ă©conomique s'accorde pour dire que les qualitĂ©s offertes sur un marchĂ© en concurrence imparfaite ne sont pas socialement optimales. En revanche, il existe un dĂ©saccord imporotant sur les issues d'une rĂ©glementation prenant la forme d'un standard de qualitĂ© minimale (SQM). L'introduction d'un SQM peut avoir diffĂ©rents effets: des effets positifs, tels que l'accroissement de la qualitĂ© la plus basse ainsi que de la concurrence, mais Ă©galement des effets nĂ©gatifs comme la diminution de la qualitĂ© moyenne ou encore la sortie du marchĂ© de certaines firmes. L'effet d'un tel instrument sur le bien-ĂȘtre social apparaĂźt alors ambigu. Afin de clarifier le rĂŽle rĂ©gulateur du SQM nous proposons une revue de littĂ©rature se focalisant sur la relation entre ses effets et les caractĂ©ristiques du marchĂ©.
Investigating Non-Linearities in the Relationship Between Real Exchange Rate Volatility and Agricultural Trade
The article analyzes production and marketing lags in agri-food supply chains that force competitive producers and processors to commit to output targets before prices and exchange rates are realized. We show that export markets act as put options for exporters and an increase in the volatility of the real exchange rate will generally increase exports. Relaxing the assumptions about the real exchange rate distribution and risk preferences of producers and/or processors can introduce non-linearities in the relationship between exports and real exchange rate volatility. This relationship is investigated using the flexible non-linear inference framework of Hamilton (2001). Bilateral export equations for Canadian pork exports to the U.S. and Japan are specified. The empirical model shows that real exchange rate volatility has statistically significant non-linear effects on aggregate pork exports. Moreover, bilateral pork exports are less sensitive to country- specific variables than aggregate volatility in the real exchange rate.Real exchange rate volatility, non-linear flexible inference, production lags, pork exports
Investigating Non-Linearities in the Relationship Between Real Exchange Rate Volatility and Trade
Production and marketing lags in agri-food supply chains force competitive primary producers and food processors to commit to output targets before prices and exchange rates are realized. A theoretical model with one processor and many price-taking primary producers is developed to show that an increase in the volatility of the export price generally increases exports under risk neutrality. Furthermore, relaxing the assumption that the processing firm is risk neutral introduces non- linearities in the relationship between exports and export price volatility. This relationship is empirically investigated using the flexible non-linear inference framework developed by Hamilton (2001). The theoretical model provides the foundation for empirical bilateral export equations for Canadian pork exports to the U.S. and Japan. The empirical investigation supports the hypothesis that export price volatility has statistically significant non-linear effects on Canadian pork exports.Exchange rate volatility, non-linear flexible inference, production lags, pork exports
Economies of Scale in the Canadian Food Processing Industry
Cost functions for three Canadian manufacturing agri-food sectors (meat, bakery and dairy) are estimated using provincial data from 1990 to 1999. A translog functional form is used and the concavity property is imposed locally. The Morishima substitution elasticities and returns to scale elasticities are computed for different provinces. Inference is carried out using asymptotic theory as well as bootstrap methods. In particular, the ability of the double bootstrap to provide refinements in inference is investigated. The evidence suggests that there are significant substitution possibilities between the agricultural input and other production factors in the meat and bakery sectors. Scale elasticity parameters indicate that increasing returns to scale are present in small bakery industries. While point estimates suggest that increasing returns to scale exist at the industry level in the meat sector, statistical inference cannot rule the existence of decreasing returns to scale. To account for supply management in the dairy sector, separability between raw milk and the other inputs was introduced. There exists evidence of increasing returns to scale at the industry level in the dairy industries of Alberta and New Brunswick. The scale elasticity for the two largest provinces (Ontario and Quebec) is greater than one, but inference does not reject the null hypothesis of increasing returns to scale.Translog cost function; Canadian food processing industry; returns to scale; double bootstrap
Paying not to sell
In this paper we show that, in the presence of buyer and seller power, a monopolist can enter into a costly contractual relationship with a low-quality supplier with the sole intention of improving its bargaining position relative to a high-quality supplier, without ever selling the good produced by that firm
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