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Ensuring quality provision through capacity regulation under price competition

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  • BOCCARD, Nicolas
  • WAUTHY, Xavier Y.

Abstract

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.

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File URL: http://dx.doi.org/10.2202/1935-1704.1655
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers RP with number -2259.

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Handle: RePEc:cor:louvrp:-2259

Note: In : The B.E. Journal of Theoretical Economics, 10(1) (Topics), Article 47
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