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Can competition reduce quality?

Brekke, Kurt Richard; Siciliani, Luigi; Straume, Odd Rune
Working paper
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URI
http://hdl.handle.net/11250/163428
Date
2012-03
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  • Discussion papers (SAM) [638]
Abstract
We study the effect 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 offer a novel mechanism whereby competition leads to lower quality. This

mechanism relies on two key assumptions, namely that the providers are motivated and riskaverse. Our proposed mechanism can help explain several empirical findings of a negative

effect of competition on quality.
Publisher
Norwegian School of Economics, Department of Economics
Series
Discussion paper;9/2012

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