Professional associations and other producer groups often complain that their reputation is damaged by other groups providing a similar but lower-quality service and that the latter should be regulated. We examine the conditions under which a common regulatory regime can induce Pareto-improvements by creating a common reputation for quality among heterogeneous producers, when the regulator cannot commit to a given quality. A common reputation can be created only if the groups are not too different and if marginal cost is declining. High cost groups and small groups benefit most from forming a common regime.
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Find related papers by JEL classification: L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
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