Minimum Quality Standards in Hedonic Markets with Environmental Externalities |
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| Authors: | Giulio Ecchia Luca Lambertini Alessandro Tampieri |
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| Institution: | 1. Department of Economics, University of Bologna, Piazza Scaravilli 2, 40126, Bologna, Italy
2. Department of Economics, University of Bologna, Strada Maggiore 45, 40125, Bologna, Italy
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| 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 trade-off between the beneficial effects of quality enhancement on prices and the associated undesirable increase in the environmental externality. |
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