 Price-Quality Competition in a Mixed DuopolyTilman Klumpp () and Xuejuan Su No 2018-5, Working Papers from University of Alberta, Department of Economics Abstract: We examine competition between a private and a public provider in markets for "merit goods" such as education, healthcare, housing, recreation, or culture. The private firm provides a high-price/high-quality variety of the good and serves richer individuals, while the public firm provides a low-price/low-quality variety and serves poorer individuals. We first characterize the private competitor's best response to changes in the public firm's price and quality. This enables us to examine the distributional effects of government policies aimed at enhancing access to publicly provided goods, and of changes to the government's budget constraint that make publicly provided goods more expensive or decrease their quality. We then derive the government's optimal provision policy, taking the private response into consideration. Our results have implications for the financing of publicly provided goods, and for whether additional resources, if available, should be spent on reducing the price or enhancing the quality of these goods. Keywords: Mixed duopoly; quality differentiation; public provision of private goods; crowding-out/in; funding of public services; distribution (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2018_005 Access Statistics for this paper More papers in Working Papers from University of Alberta, Department of Economics Contact information at EDIRC. |
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