We present a model of vertical product differentiation and exit where a domestic and a foreign firm face fixed setup costs and quality-dependent costs of production and compete in quality and price in the domestic market. Quality-dependent costs are quadratic in qualities, but independent of the...

In a model of vertical product differentiation, duopolistic firms face quality-dependent costs and compete in quality and price in two segmented markets. Minimum quality standards, set according to the principle of Mutual Recognition, can be used to increase welfare. The results of the one-shot...

In many markets, governments set minimum quality standards while some sellers choose to compete on the basis of quality by exceeding them. We analyze this phenomenon using a model of vertical product differentiation, interpreting quality as an "environmental friendliness" characteristic fully...