Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/39586 
Authors: 
Year of Publication: 
1998
Series/Report no.: 
ZEI Working Paper No. B 15-1998
Publisher: 
Rheinische Friedrich-Wilhelms-Universität Bonn, Zentrum für Europäische Integrationsforschung (ZEI), Bonn
Abstract: 
The answer to the question in the title is yes for the case of ad-valorem taxes, a foreign industry that produces a vertically differentiated good of higher quality, and costs that take the form of qualitydependent fixed costs for both the foreign and domestic firm. The domestic industry loses profits due to the foreign industry's lowering of product quality which intensifies price competition. This result carries through to the case of additional constant marginal costs, if this cost component does not increase too fast with increases in product quality produced. However, it does not hold with qualitydependent marginal costs. In this latter case, the foreign firm will reduce output rather than quality, which tends to reduce foreign competition.
Subjects: 
trade
tariffs
vertical product differentiation
quality-dependent costs
JEL: 
F12
F13
L13
Document Type: 
Working Paper

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