Ensuring Quality Provision through Capacity Regulation under Price Competition

Nicolas Boccard () and Xavier Wauthy

The B.E. Journal of Theoretical Economics, 2010, vol. 10, issue 1, 27

Abstract: 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.

Keywords: quality; minimum quality standards; price competition; capacity (search for similar items in EconPapers)
Date: 2010
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DOI: 10.2202/1935-1704.1655

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