We investigate the introduction of a minimum quality standard (MQS) in a vertically differentiated duopoly with an environmental externality. We establish that the MQS bites only if the hedonic component of consumer preferences is sufficiently strong. Then, we illustrate an underlying tradeoff between the beneficial effects of quality enhancement on prices and the associated undesirable increase in the environmental externality.
Minimum Quality Standards in Hedonic Markets with Environmental Externalities / Ecchia, Giulio; Lambertini, Luca; Tampieri, Alessandro. - In: ENVIRONMENTAL MODELING & ASSESSMENT. - ISSN 1420-2026. - STAMPA. - 18:(2013), pp. 319-323. [10.1007/s10666-012-9345-z]
Minimum Quality Standards in Hedonic Markets with Environmental Externalities
TAMPIERI, ALESSANDRO
2013
Abstract
We investigate the introduction of a minimum quality standard (MQS) in a vertically differentiated duopoly with an environmental externality. We establish that the MQS bites only if the hedonic component of consumer preferences is sufficiently strong. Then, we illustrate an underlying tradeoff between the beneficial effects of quality enhancement on prices and the associated undesirable increase in the environmental externality.
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