Quality competition, welfare, and regulation

Albert, Ching‐to; Burgess, James

doi:10.1007/bf01253480

Cited by 131 publications

(116 citation statements)

References 7 publications

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“…If utility is linear in income, equilibrium quality coincides with the socially optimal level. This result is well known from the literature (Ma and Burgess, 1993;Gravelle, 1999) and is due to the marginal utility being equal for the marginal and average consumer. 2;3 However, if utility is strictly concave in income, the marginal utility is higher for the marginal than for the average consumer in the Nash equilibrium, implying that the equilibrium supply of quality is below the socially optimal level.…”

Section: Introductionsupporting

confidence: 63%

“…Our results show that the total e¤ect depends crucially on the marginal utility of income. If the marginal utility is constant, the two e¤ects cancel each other out and the equilibrium quality level is independent of t, as in Ma and Burgess (1993) and Gravelle (1999). However, if utility is strictly concave, the indirect e¤ect on quality incentives through a lower price-cost margin is reduced, implying that lower non-monetary transportation costs will increase the equilibrium supply of quality.…”

Section: Transportation Costsmentioning

confidence: 99%

“…If utility is linear in income, more competition -as measured by lower transportation costs -leads to lower prices but has no e¤ect on quality, since the two aforementioned e¤ects exactly cancel each other out (as in Ma andBurgess, 1993, andGravelle, 1999). Clearly, this is a special case.…”

Section: Introductionmentioning

confidence: 99%

“…Using the latter measure, Ma and Burgess (1993) report no e¤ect of less product di¤erentiation on quality incentives. In their paper, the direct e¤ect of more competition on quality incentives is exactly o¤set by the indirect e¤ect via lower prices.…”

Section: Introductionmentioning

confidence: 99%

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Price and quality in spatial competition

Brekke

Siciliani

Straume

2010

Regional Science and Urban Economics

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We study the relationship between competition and quality within a spatial competition framework where …rms compete in prices and quality. We generalise existing literature on spatial price-quality competition along several dimensions, including utility functions that are non-linear in income and cost functions that are non-separable in output and quality. Our main message is that the scope for a positive relationship between competition and quality is underestimated in the existing literature. If we allow for income e¤ects by assuming that utility is strictly concave in income, we …nd that lower transportation costs always lead to higher quality. The presence of income e¤ects might also reverse a previously reported negative relationship between the number of …rms and equilibrium quality. This reversal result is further strenghtened if there are cost substitutabilities between output and quality. Equilibrium quality provision is always less than socially optimal in the presence of income e¤ects.

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Section: Introductionsupporting

confidence: 63%

Section: Transportation Costsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Price and quality in spatial competition

Brekke

Siciliani

Straume

2010

Regional Science and Urban Economics

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“…Similarly, for the function H. The arguments 2 ; :::; N in G and H include r 1 and q 1 , so if we partially di¤erentiate G or H with respect to r 1 and q 1 , we get the summation terms in (16) and (17). However, for j = 2; :::; N , r j and q j are only in the argument j in G and H. When we partially di¤erentiate G or H with respect to r j or q j , we only get the simpler expressions in (18) and (19). )…”

Section: Qualities and Equilibrium Pricesmentioning

confidence: 99%

Product Differentiation with Multiple Qualities

Barigozzi

Albert

2016

SSRN Journal

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We study subgame-perfect equilibria of the classical quality-price, multistage game of vertical product di¤erentiation. Each …rm can choose the levels of an arbitrary number of qualities. Consumers'valuations are drawn from independent and general distributions. The unit cost of production is increasing and convex in qualities. We characterize equilibrium prices, and the equilibrium e¤ects of qualities on the rival's price in the general model. We present necessary and su¢ cient conditions for equilibrium di¤erentiation in any of the qualities.

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Uniform pricing and subsidy coordination mechanism in a two‐tier healthcare system under a co‐payment policy

Chen

2023

Appl Stoch Models Bus & Ind

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Recently, the lengthy waiting time in public hospitals (called the public system) under the free healthcare policy has become a serious problem. To address this issue, motivated by the Japanese healthcare system, this paper investigates a two‐tier co‐payment healthcare system under a uniform pricing and subsidy coordination mechanism. In such a setting, the public system and the private system (i.e., the private hospitals) compete for market share with different objectives, whereas the government uniformly sets the service price and the subsidy rate to maximize social welfare under a total budget constraint. Compared with two free healthcare policy cases implemented in the Canadian and Australian healthcare systems respectively in terms of social welfare, the results show that when the market demand (or the patient service quality sensitivity) is sufficiently high (sufficiently low), the uniform pricing and subsidy coordination mechanism is better and worse otherwise; and when the patient's waiting sensitivity (or the total government budget) is in an appropriate middle range (sufficiently low or high), the mechanism can outperform than the free policy cases.

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Quality competition, welfare, and regulation

Cited by 131 publications

References 7 publications

Price and quality in spatial competition

Price and quality in spatial competition

Product Differentiation with Multiple Qualities

Uniform pricing and subsidy coordination mechanism in a two‐tier healthcare system under a co‐payment policy

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