Technology Gap,Minimum Quality Standard And Government’s Regulation Dilemma

Minimum Quality Standard(MQS)is a frequently used means of quality regulation,but its effectiveness is always controversial.This paper attempts to analyze the effectiveness of MQS and its influence on social welfare,based on a duopoly model with vertical differentiation of quality.Compared with the existing research,the main contribution of this paper lies in the following aspects:(1)We do the research by the two aspects of market competition and government regulation to analyse the influence of minimum quality standard policy for corporate profits,consumer surplus and social welfare effects;(2)we provide a comprehensive analysis of the quality landslide and the government quality supervision dilemma in some industries.Not only did we explain why in the high standards of quality part of the industry will still exist quality problems,also explain why regulators will take the initiative to reduce the quality standard and deregulation under certain conditions;(3)combined with the market competition environment,according to the government regulation dilemma,we suggest that through special subsidies to encourage enterprises to carry out technology upgrades narrow the technology gap between enterprises,in order to better play the minimum quality standard policy effect Fruit.This study shows that when the quality of competition between firms in the market,the government raising the minimum quality standard was more relaxed,can be forced enterprises to improve quality,and strengthen the market competition to increase the welfare of consumers,and ultimately improve the overall social welfare.However,the effectiveness of the above policy will be affected by the competition situation of the market and the efficiency and strength of the government supervision.The technology gap continues to expand or cause the government to set minimum quality standard when faced with the difficult to break the "ceiling effect" and the dilemma of the minimum quality standards must be declining,or technical disadvantage enterprises will be forced to withdraw from the market,the advantages of enterprise technology has become a monopoly.The government in enhancing the quality standards at the same time,in order to avoid the formation of monopolies,we must take the initiative to reduce the efficiency of supervision and regulation,with quality and technical weaknesses of the enterprise is not reached,and such lax regulation of the enterprise will form incentive distortions in the market competition,the final result is the upgrading of quality standards completely lost,or the social welfare impact of uncertainty.On the other hand,when the efficiency of government regulation is high and the minimum quality standard can be strictly promoted,the profit of the technology dominant enterprises will be strictly decreased in the process,and the overall industry profits will also decrease when the technology gap is bigger.This means that the behavior of quality regulation will protect the rights and interests of consumers and damage the profits of some enterprises or the whole industry.The conflict between different stakeholders and the diversified development goals of the government at different stages of development will also make the government fall into a dilemma of "policy burden".