Trade and strategic regulatory bias in monopolistic industries

Regulatory standards, such as on health and safety, may be subject to strategic bias when a country engages in trade.Where regulation is to correct an undersupply of quality by a monopolistic industry, if regulators do not cooperate and …rms can vary standards, there will be a tendency to strategic overregulation, which leads to excessive, rather than inadequate trade.When there is a mixture of horizontal and vertical quality regulations, the pro…t-shifting motive for protection is less than the previous literature suggests.In this case, contrary to previous …ndings, mutual recognition agreements lead to underregulation.