Quality in Open Markets: The Sumo Conjecture

Bernard, Christophe, Calmette, Marie-Françoise, Kilkenny, Maureen, Loustalan, Catherine and Pechoux, Isabelle (2018) Quality in Open Markets: The Sumo Conjecture. Revue économique, 69 (2).

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Official URL: http://tse-fr.eu/pub/32479

Abstract

We show how a large country’s entrance on world markets can lead to lower and less quality diversity available to consumers rather than more. In our model, autarky quality is directly 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 despite the existence of customers willing to pay for higher quality. 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.

Item Type: Article
Language: English
Date: March 2018
Refereed: Yes
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 22 May 2018 09:23
Last Modified: 15 Jul 2019 13:37
OAI ID: oai:tse-fr.eu:32479
URI: http://publications.ut-capitole.fr/id/eprint/25856

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