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Consumer salience and quality provision in (un)regulated public service markets

Yiquan Gu, Alexander Rasch and Tobias Wenzel

Regional Science and Urban Economics, 2022, vol. 93, issue C

Abstract: This article examines the impacts of publishing quality indicators in publicly financed service markets, such as education and healthcare markets. We set up a model in which the reporting of such indicators increases consumers’ decision weight on quality relative to other attributes (prices and horizontal match), affecting the competition between service providers. We use the model to study the effects in two market environments: markets with regulated prices and markets with unregulated prices. We find that the publication of quality indicators increases quality investments by service providers, but also increases prices and reduces variety. Consumer and total welfare can decrease with such policies, particularly when consumers are heavily subsidised.

Keywords: Service markets; Quality reporting; Variety; Entry; Regulation; Public finance (search for similar items in EconPapers)
JEL-codes: I10 I20 L15 L51 (search for similar items in EconPapers)
Date: 2022
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Working Paper: Consumer salience and quality provision in (un)regulated public service markets (2020) Downloads
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DOI: 10.1016/j.regsciurbeco.2021.103754

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