A model of international trade with vertical differentiation and Stackelberg leadership

Bernard, Christophe, Calmette, Marie-Françoise, Kilkenny, Maureen, Loustalan, Catherine and Pechoux, Isabelle (2016) A model of international trade with vertical differentiation and Stackelberg leadership. TSE Working Paper, n. 16-708, Toulouse

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Official URL: http://tse-fr.eu/pub/31076

Abstract

This paper uses a model of international trade under duopoly to investigate under which conditions a large country’s entrance on world markets can lead to lower and less quality diversity available to consumers rather than more. In our partial model, autarky quality is proportional to the willingness to pay for quality and home market size, and inversely proportional to the cost of quality. We formalize strategically interacting firms, and identify the context in which a low-quality producer can lead, driving high-quality producers out of the market. We discuss the feasibility of this ‘predatory strategy’ by an emerging country. It is more likely in contexts where the emerging exporter is much larger and when the difference in willingness to pay for quality between countries is not too large.

Item Type: Monograph (Working Paper)
Language: English
Date: October 2016
Place of Publication: Toulouse
Uncontrolled Keywords: International trade, market size effect, Stackelberg strategy, quality competition
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 07 Oct 2016 10:02
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:31076
URI: http://publications.ut-capitole.fr/id/eprint/22423

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