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Regulating quality by regulating quantity: a case against minimum quality standards

Nicolas Boccard () and Xavier Wauthy

No 2009052, CORE Discussion Papers from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We show in a simple model of entry with sunk cost, that a regulator prefers limiting the output, or capacity, of the incumbent firm rather than imposing a "Minimum Quality Standard" in order to help the entrant to provide high quality. As a by-product, our analysis makes a contribution to the study of Bertrand-Edgeworth competition in a market with differentiated products.

Keywords: quality; minimum quality standards; price competition (search for similar items in EconPapers)
JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Date: 2009-09-01
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