Quotas act as facilitating practices under price competition. Because they relax price competition, they may affect firms' quality choice in very specific ways. We analyze this issue by considering the following stage game: a domestic government chooses an import quota, then a domestic and a...

We study duopoly competition between a domestic and a foreign firm who first choose their quality and then compete in prices in the domestic market. As is well known, the free-trade equilibrium exhibits quality differentiation and indeterminacy of the quality leader. We show that an import quota...