This paper shows that some of the main policy implications in <link rid="b3">Park (2001</link>) and <link rid="b5">Zhou, Spencer, and Vertinsky (2002</link>) are sensitive to their assumptions on marginal production costs. The unilaterally optimal policy for investment towards quality improvement is analyzed, assuming constant and...

It has been shown that trade restrictions such as tariffs, import quotas, and voluntary export restrictions, lead to quality upgrading of imports. In this paper, however, we reconsider this proposition by focusing on the nature of cost functions. Based on a standard vertical differentiation...