The market of Peruvian coffee has faced decreasing exports and diminishing prices due to the country lack of generally recognized quality standards, and the best path is to build quality-recognized standards for the coffee growers. In order to analyze this scenario, a model of vertical product differentiation to discuss the influence of two policy tools on the quality of Peruvian coffee was set up. The first tool in question was to set minimum quality standards for the coffee industry, and the second one was to subsidize the coffee industry for quality-upgrading expenditures. It is shown that the policy effects are equivalent for the minimum quality standards and the quality-upgrading subsidies, which will no doubt help the Peruvian coffee growers raise its product quality.

Key words: Peruvian coffee industry, quality, minimum quality standards, quality-improving subsidies.