This paper studies the effect of non-uniform distributions on quality competition in regulated markets. Our model finds firms opting for minimal differentiated outcomes, regardless of the type of distribution. In symmetric models, regulated prices only affect quality levels. An unrestricted non-symmetric setting allows the regulator to alter both quality levels and hospital locations. In addition, distributions with diffuse demand see 40% higher transport costs compared to distributions with centralized demand. The former profits more from socially planned locations then the latter. Furthermore, in contrast to the symmetric distributions, welfare is maximized when hospitals are not located at the 25th and 75th percentile, but are shift towards less concentrated areas. Finally, depending on the size of (relative) transport and fixed hospital location costs, the regulator will be inclined to either choose for a central location or an infinite number of locations.

Bijkerk, S.H.
hdl.handle.net/2105/52149
Economics of Management and Organisation
Erasmus School of Economics

Wildenbeest, W.K. (2020, April 30). quality competition in regulated, non-uniform, markets. Economics of Management and Organisation. Retrieved from http://hdl.handle.net/2105/52149