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

Yiquan Gu, Alexander Rasch and Tobias Wenzel

No 20-087, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper examines the publication of quality indicators in service markets with public finance systems, such as education and healthcare markets. We provide a spatial model of product differentiation in which the reporting of such indicators increases consumers' decision weight on quality relative to other attributes (such as prices and horizontal match) and 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 leads to higher prices and less product variety. Consumer and total welfare may decrease with such policies, in particular 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: 2020
New Economics Papers: this item is included in nep-com and nep-reg
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Related works:
Journal Article: Consumer salience and quality provision in (un)regulated public service markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20087

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