Can competition reduce quality?

Kurt Brekke (), Luigi Siciliani and Odd Rune Straume

No 9/2012, Discussion Paper Series in Economics from Norwegian School of Economics, Department of Economics

Abstract: We study the e¤ect of competition on quality in markets such as health care, long-term care and education, when providers choose both prices and quality in a setting of spatial competition. We o¤er a novel mechanism whereby competition leads to lower quality. This mechanism relies on two key assumptions, namely that the providers are motivated and risk-averse. Our proposed mechanism can help explain several empirical …ndings of a negative e¤ect of competition on quality.

Keywords: Quality and price competition; Motivated providers; Risk-averse providers. (search for similar items in EconPapers)
JEL-codes: D21 D43 L13 L30 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2012-04-02
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Can Competition Reduce Quality? (2018)
Working Paper: Can Competition Reduce Quality? (2014)
Working Paper: Can competition reduce quality? (2014)
Working Paper: Can competition reduce quality? (2012)
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