Can competition reduce quality?
AbstractWe study the e¤ect of competition on quality in markets such as health care, long-term care and education, when providers choose both prices and quality in a setting of spatial competition. We o¤er a novel mechanism whereby competition leads to lower quality. This mechanism relies on two key assumptions, namely that the providers are motivated and risk-averse. Our proposed mechanism can help explain several empirical …ndings of a negative e¤ect of competition on quality.
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Bibliographic InfoPaper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 9/2012.
Length: 9 pages
Date of creation: 02 Apr 2012
Date of revision:
Contact details of provider:
Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 959 277
Fax: 5595 9100
Web page: http://www.nhh.no/sam/
More information through EDIRC
Quality and price competition; Motivated providers; Risk-averse providers.;
Other versions of this item:
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
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