This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Price and quality in spatial competition

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Kurt R. Brekke () (Department of Economics and Helth Economics Bergen, Norwegian School of Economics and Business Administration)
Luigi Siciliani () (Department of Economics and Centre for Health Economics, University of York, Heslington)
Odd Rune Straume () (Universidade do Minho - NIPE)

Additional information is available for the following registered author(s):

Abstract

We study the relationship between competition and quality within a spatial competition framework where firms compete in prices and quality. We generalise existing literature on spatial price-quality competition along several dimensions, including utility functions that are non-linear in income and cost functions that are non-separable in output and quality. Our main message is that the scope for a positive relationship between competition and quality is underestimated in the existing literature. If we allow for income effects by assuming that utility is strictly concave in income, we find that lower transportation costs always lead to higher quality. The presence of income effects might also reverse a previously reported negative relationship between the number of firms and equilibrium quality. This reversal result is further strenghtened if there are cost substitutabilities between output and quality. Equilibrium quality provision is always less than socially optimal in the presence of income effects.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www3.eeg.uminho.pt/economia/nipe/docs/2009/NIPE_WP_21_2009.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 21/2009.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:nip:nipewp:21/2009

Contact details of provider:
Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
Phone: +351-253604510 ext 5532
Fax: +351-253601380
Email:
Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
More information through EDIRC

Order Information:
Email:

For technical questions regarding this item, or to correct its listing, contact: (Maria João Thompson).

Related research
Keywords: Spatial competition; Quality; Income effects.;

Other versions of this item:

Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Martin Gaynor, 2006. "What Do We Know About Competition and Quality in Health Care Markets?," NBER Working Papers 12301, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Ching-to Ma & James Burgess, 1993. "Quality competition, welfare, and regulation," Journal of Economics, Springer, vol. 58(2), pages 153-173, June. [Downloadable!] (restricted)
    Other versions:
  3. Rachel E. Kranton, 2003. "Competition and the Incentive to Produce High Quality," Economica, London School of Economics and Political Science, vol. 70(279), pages 385-404, 08. [Downloadable!] (restricted)
  4. Michael Mazzeo, 2003. "Competition and Service Quality in the U.S. Airline Industry," Review of Industrial Organization, Springer, vol. 22(4), pages 275-296, June. [Downloadable!] (restricted)
  5. Degryse, Hans & Irmen, Andreas, 2001. "Attribute dependence and the provision of quality," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 547-569, September. [Downloadable!] (restricted)
    Other versions:
  6. Brekke, Kurt R. & Nuscheler, Robert & Straume, Odd Rune, 2007. "Gatekeeping in health care," Journal of Health Economics, Elsevier, vol. 26(1), pages 149-170, January. [Downloadable!] (restricted)
    Other versions:
  7. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August. [Downloadable!] (restricted)
  8. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November. [Downloadable!] (restricted)
  9. Domberger, Simon & Sherr, Avrom, 1989. "The impact of competition on pricing and quality of legal services," International Review of Law and Economics, Elsevier, vol. 9(1), pages 41-56, June. [Downloadable!] (restricted)
  10. Propper, Carol & Burgess, Simon & Green, Katherine, 2004. "Does competition between hospitals improve the quality of care?: Hospital death rates and the NHS internal market," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1247-1272, July. [Downloadable!] (restricted)
  11. Economides, Nicholas, 1993. "Quality variations in the circular model of variety-differentiated products," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 235-257, April. [Downloadable!] (restricted)
  12. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 247-262, Summer. [Downloadable!] (restricted)
  13. Asher Wolinsky, 1997. "Regulation of Duopoly: Managed Competition vs Regulated Monopolies," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 6(4), pages 821-847, December. [Downloadable!] (restricted)
  14. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn. [Downloadable!] (restricted)
  15. Astrid A. Dick, 2007. "Market Size, Service Quality, and Competition in Banking," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(1), pages 49-81, 02. [Downloadable!] (restricted)
  16. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? You can import bibliographic info in various formats into you bibliographic tool, or just into your word processor. See under "publisher info" on each abstract page.

This page was last updated on 2009-11-21.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.