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Ensuring Quality Provision through Capacity Regulation under Price Competition

  • Nicolas Boccard and Xavier Y. Wauthy
Published/Copyright: October 27, 2010

We show in a simple duopoly model of vertical differentiation that when a welfare maximizing regulator wishes to ensure entry while avoiding strategic quality underprovision, regulating the incumbent's capacity is preferable to imposing a “Minimum Quality Standard” on products. In order to establish this result, we make an original contribution to the study of Bertrand-Edgeworth competition in a market with differentiated products.

Published Online: 2010-10-27

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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