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Can competition keep the restrooms clean? Price, quality and spatial competition

Dieter Pennerstorfer ()

Regional Science and Urban Economics, 2017, vol. 64, issue C, 117-136

Abstract: This article investigates the influence of competition on price and product quality among Austrian camping sites, a market characterized by both horizontal (spatial) and vertical product differentiation. Theoretically, the effect of competition on quality is ambiguous and depends on the degree of cost substitutability between output and quality. Estimating a system of equations shows that intense competition has a positive impact on product quality and a negative effect on prices (conditional on quality). As high quality is associated with high prices, the total effect of competition on prices is rather small.

Keywords: Spatial competition; Product quality; Retail prices; Retail markets; Camping sites (search for similar items in EconPapers)
JEL-codes: D22 L13 L81 R32 (search for similar items in EconPapers)
Date: 2017
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