Ensuring quality provision through capacity regulation under price competition
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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|Note:||In : The B.E. Journal of Theoretical Economics, 10(1) (Topics), Article 47|
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