Catching Up in Terms of Product Quality



This paper analyzes the two stage quality model with un-served consumers. It is well known that the model is difficult to solve. One of the main consequences of this is that comparative static exercises are rarely carried out in the model. We show that by taking quality in the relative sense not only can the model be fully solved; comparative static exercises can be performed as well through simulation. We use the comparative static results to show that in a North – South framework, catching up by the South results in enhanced welfare for the South as well as aggregate world welfare even though the welfare for the North falls.


Consumer Surplus Lower Quality Product Comparative Static Result Duopoly Model Lower Income Consumer 
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Copyright information

© Springer India 2014

Authors and Affiliations

  1. 1.Indian Institute of Foreign TradeKolkataIndia
  2. 2.Department of EconomicsCalcutta UniversityKolkataIndia

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