Publicação
Can Competition Reduce Quality?
| Resumo: | We analyze the effect of competition on quality provision in spatial markets where providers compete in both price and quality (e.g., health care, long-term care, child care, education). By making two key assumptions about the providers in such markets, namely that they are (partly) motivated and have decreasing marginal utility of income, we find, contrary to the existing literature, an unambiguously negative relationship between competition intensity and quality provision. This relationship holds regardless of whether quality and price decisions are made simultaneously or sequentially. However, even if competition reduces quality, it does not necessarily follow that social welfare is reduced. |
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| Autores principais: | Brekke, Kurt R. |
| Outros Autores: | Siciliani, Luigi; Straume, Odd Rune |
| Assunto: | Quality and price competition Motivated providers Decreasing marginal utility of income |
| Ano: | 2018 |
| País: | Portugal |
| Tipo de documento: | artigo |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade do Minho |
| Idioma: | inglês |
| Origem: | RepositóriUM - Universidade do Minho |
| Resumo: | We analyze the effect of competition on quality provision in spatial markets where providers compete in both price and quality (e.g., health care, long-term care, child care, education). By making two key assumptions about the providers in such markets, namely that they are (partly) motivated and have decreasing marginal utility of income, we find, contrary to the existing literature, an unambiguously negative relationship between competition intensity and quality provision. This relationship holds regardless of whether quality and price decisions are made simultaneously or sequentially. However, even if competition reduces quality, it does not necessarily follow that social welfare is reduced. |
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