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Selection, Heterogeneity, and Entry in Professional Markets

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  • Marco Alderighi
  • Claudio A. Piga

Abstract

We analyze two different cases of entry regulation in professional markets: first, when licensing is a requirement for becoming a professional (lawyers); second, when entry and price restrictions are applied on a geographical basis (pharmacists). Both cases are investigated within a circular model of localized competition and heterogeneous players. The analysis reveals that licensing introduces a selection mechanism which is effective in preventing entry of inefficient players in markets with large ex ante heterogeneity. Furthermore, because in the second case excessive entry is reduced as the degree of heterogeneity increases, our analysis lends support to a policy that simultaneously relaxes entry and price restrictions.

Suggested Citation

  • Marco Alderighi & Claudio A. Piga, 2014. "Selection, Heterogeneity, and Entry in Professional Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 925-951, December.
    • Handle: RePEc:bla:jemstr:v:23:y:2014:i:4:p:925-951
    DOI: 10.1111/jems.12074
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    References listed on IDEAS

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    Cited by:

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    2. Fontana, Roberto & Zirulia, Lorenzo, 2023. "How far from the tree does the (good) apple fall? Spinout creation and the survival of high-tech firms," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 26-49.
    3. Alderighi, Marco & Nicolini, Marcella, 2022. "Strategic information disclosure in vertical markets," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    4. Benjamin Montmartin & Marcos Herrera-Gomez, 2022. "Imitative Pricing: The Importance of Neighborhood Effects in Physicians' Consultation Prices," GREDEG Working Papers 2022-02, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.

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