In many markets, governments set minimum quality standards while some sellers compete on the basis of quality by exceeding them. Such quality leadership strategies often win public acclaim, especially when they involve environmental attributes. Using a duopoly model of vertical product...

Regulators sometimes review a regulated firm's input decisions in retrospect (i.e., with "20-20 hindsight") and punish bad outcomes rather than bad decisions. When such practices are applied consistently to contracts for variable factors in a regime with profit regulation, the firm increases its...