Ensuring Quality Provision through Capacity Regulation under Price Competition

Ensuring Quality Provision through Capacity Regulation under Price Competition

We show in a simple duopoly model of vertical differentiation that when a welfare maximizing regulator wishes to ensure entry while avoiding strategic quality underprovision, regulating the incumbent's capacity is preferable to imposing a “Minimum Quality Standard” on products. In order to esta...

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Veröffentlicht in:The B.E. journal of theoretical economics 2010-01, Vol.10 (1), p.1-25
Hauptverfasser: Boccard, Nicolas, Wauthy, Xavier Y.
Format: Artikel
Sprache:eng
Schlagworte:
capacity
Differentiation
Duopolistic competition
Duopoly
Game theory
Imperfect competition
Industrial organization
minimum quality standards
Price competition
Price theory
Product differentiation
Product quality
quality
Quality standards
Regulation
Regulatory policy
Strategic behaviour
Vertical integration
Welfare
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Zusammenfassung:We show in a simple duopoly model of vertical differentiation that when a welfare maximizing regulator wishes to ensure entry while avoiding strategic quality underprovision, regulating the incumbent's capacity is preferable to imposing a “Minimum Quality Standard” on products. In order to establish this result, we make an original contribution to the study of Bertrand-Edgeworth competition in a market with differentiated products.
ISSN:2194-6124
1935-1704
1935-1704
DOI:10.2202/1935-1704.1655