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Regulating quality by regulating quantity : a case against minimum quality standards

Author

Listed:
  • BOCCARD, Nicolas

    () (Departament d'Economia, University of Girona, Spain)

  • WAUTHY, Xavier

    () (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract

We show in a simple model of entry with sunk cost, that a regulator prefers limiting the output, or capacity, of the incumbent firm rather than imposing a "Minimum Quality Standard" in order to help the entrant to provide high quality. As a by-product, our analysis makes a contribution to the study of Bertrand-Edgeworth competition in a market with differentiated products.

Suggested Citation

  • BOCCARD, Nicolas & WAUTHY, Xavier, 2009. "Regulating quality by regulating quantity : a case against minimum quality standards," CORE Discussion Papers 2009052, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2009052
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    File URL: http://www.uclouvain.be/cps/ucl/doc/core/documents/coredp2009_52.pdf
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    Cited by:

    1. Emanuele Bacchiega, 2007. "Wage bargaining and vertical differentiation," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 54(1), pages 35-52, March.

    More about this item

    Keywords

    quality; minimum quality standards; price competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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