Please use this identifier to cite or link to this item: http://hdl.handle.net/1822/12283

TitleQuality competition with motivated providers and sluggish demand
Author(s)Siciliani, Luigi
Straume, Odd Rune
Cellini, Roberto
KeywordsQuality competition
Differential games
Motivated agents
Issue date2011
PublisherUniversidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
Series/Report no.NIPE Working Paper series; 14.
Abstract(s)We study incentives for quality provision in markets where providers are motivated (semi-altruistic); prices are regulated and firms are funded by a combination of block grants and unit prices; competition is based on quality, and demand adjusts sluggishly. Health or education are sectors in which the mentioned features are the rule. We show that the presence of motivated providers makes dynamic competition tougher, resulting in higher steady-state levels of quality in the closed-loop solutions than in the benchmark open-loop solution, if the price is sufficiently high. However, this result is reversed if the price is sufficiently low (and below unit costs). Sufficiently low prices also imply that a reduction in demand sluggishness will lead to lower steady-state quality. Prices below unit costs will nevertheless be welfare optimal if the providers are sufficiently motivated.
TypeWorking paper
URIhttp://hdl.handle.net/1822/12283
Publisher versionhttp://www3.eeg.uminho.pt/economia/nipe/docs/2011/NIPE_WP_14_2011.pdf
Peer-Reviewedno
AccessOpen access
Appears in Collections:NIPE - Documentos de Trabalho

Files in This Item:
File Description SizeFormat 
NIPE_WP_14_2011.pdfNIPE - WP 14/2011582,57 kBAdobe PDFView/Open

Partilhe no FacebookPartilhe no TwitterPartilhe no DeliciousPartilhe no LinkedInPartilhe no DiggAdicionar ao Google BookmarksPartilhe no MySpacePartilhe no Orkut
Exporte no formato BibTex mendeley Exporte no formato Endnote Adicione ao seu ORCID