GDL

The purpose of this paper is to study the links between trade policy and standardization decisions. We consider a model of vertical differentiation with a foreign and domestic firm competing in the domestic market. Standardization is viewed as a quality upgrade 'per-ceived' by domestic consumers. We show that liberalization of trade is associated with standardization of products if the latter results in a widening of the qualities' gap. We also show that the non-compulsory cooperative choice of standardization by firms constrains the optimal tariff policy of the domestic government. In particular, we discuss the welfare implications of precommitment by the government to a given tariff level before standardiza-tion is chosen by firms.

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