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This paper develops a game‐theoretic model that examines the entry decisions of two competing platform owners with differentiated research and development (R&D) efficiency and the response strategy of an original equipment manufacturer (OEM) in selecting which platform to cooperate with. The OEM and platform owners compete on quality and price in the face of consumers with heterogeneous preferences across the dimensions of the device and platform. We analyze the interaction between the entry decisions of platform owners and the OEM's response strategy within two cooperation models. In the charging model, we find that in the absence of entry, the OEM prefers the high‐efficiency platform. When only one platform owner enters, the OEM prefers the low‐efficiency platform. If the differentiated R&D efficiency and the device differentiation cost are large, both platform owners will choose to enter and the OEM will cooperate with the low‐efficiency platform. In the bundling model, when only one platform owner enters, only at a large cost of device differentiation will the OEM cooperate with the platform that enters the market to weaken market competition. In particular, when only the high‐efficiency platform enters, it is interesting that there exists a large cost of device differentiation that makes the high‐efficiency platform more favorable in the case when the OEM cooperates with the low‐efficiency platform. Our study provides practical insights into platform entry and OEM response. [ABSTRACT FROM AUTHOR]

The internationalization of production requires multinational firms to determine a local content rate for their products made and sold in a foreign country. In this paper, we investigate the impact of a government's local content requirement (LCR) on the local content rate and pricing decisions of a multinational firm who competes with a local firm in a market. In an emerging market, the multinational firm increases his local content rate to comply with an LCR if the LCR involves a moderate threshold and a sufficiently large penalty tariff rate. Although a small penalty tariff rate cannot induce the multinational firm's compliance, a larger penalty tariff leads the firm to adopt a higher local content rate. When the multinational firm complies with the LCR, a higher LCR threshold or penalty tariff rate shifts away the multinational firm's demand and profit but may not benefit the local firm if the two firms' price competition is fiercer than their quality competition. In addition, if the two firms' quality competition is fiercer than their price competition, a large LCR threshold may still not benefit the local firm. In contrast, in a developed market, the multinational firm should increase his local content rate as the quality‐cost tradeoff ratio increases. The LCR plays the same effect on the multinational firm as that in an emerging market, whereas its effect on the local firm still depends on the relative intensity of the two firms' price competition versus quality competition, but under reverse conditions. [ABSTRACT FROM AUTHOR]

Price competition and quality competition are the main ways to increase and maintain international competitiveness in the world. However, competitive strategies can vary significantly from product to product. With the utility function and trade gravity model as the research framework in this paper, we use the top 10 countries in terms of the trade volume of forest products from 2012 to 2021 as samples to systematically explore the differential impacts of price and quality on the international competitiveness of forest products. The results of the panel data model that show the regression coefficient of forest product price in terms of international competitiveness are significantly negative, while the regression coefficient of forest product quality is significantly positive, but the absolute value of the regression coefficient of product quality is higher than that of forest product price. Thus, the price and quality of forest products are key factors affecting international competitiveness in general, with the quality of forest products having a higher impact on international competitiveness than the price. However, a further analysis of different forest product categories and countries revealed significant differences in the significance and magnitude of price and quality impacts on international competitiveness. The quality of forest products contributes more to international competitiveness in Brazil, Canada, Germany, Russia, Sweden and the United States. Conversely, the price of forest products in China, Finland, Italy and Poland contributes more to international competitiveness. Therefore, an objective choice of price, quality or a quality:price ratio strategy, taking into account the industry and characteristics of forest products in each country, can contribute to the sustainable improvement of the international competitiveness of forest products. [ABSTRACT FROM AUTHOR]

Price competition and quality competition are the main ways to increase and maintain international competitiveness in the world. However, competitive strategies can vary significantly from product to product. With the utility function and trade gravity model as the research framework in this paper, we use the top 10 countries in terms of the trade volume of forest products from 2012 to 2021 as samples to systematically explore the differential impacts of price and quality on the international competitiveness of forest products. The results of the panel data model that show the regression coefficient of forest product price in terms of international competitiveness are significantly negative, while the regression coefficient of forest product quality is significantly positive, but the absolute value of the regression coefficient of product quality is higher than that of forest product price. Thus, the price and quality of forest products are key factors affecting international competitiveness in general, with the quality of forest products having a higher impact on international competitiveness than the price. However, a further analysis of different forest product categories and countries revealed significant differences in the significance and magnitude of price and quality impacts on international competitiveness. The quality of forest products contributes more to international competitiveness in Brazil, Canada, Germany, Russia, Sweden and the United States. Conversely, the price of forest products in China, Finland, Italy and Poland contributes more to international competitiveness. Therefore, an objective choice of price, quality or a quality:price ratio strategy, taking into account the industry and characteristics of forest products in each country, can contribute to the sustainable improvement of the international competitiveness of forest products.

This paper examines the effects of a rival's cost increase in a vertically differentiated market with endogenous product qualities. It provides cost-side and demand-side conditions under which a firm gains and under which it loses from its rival's cost increase. We show how the gain or loss depends on: (i) the absence or presence of outside options for consumers; (ii) the degree of heterogeneity in consumer taste for quality; (iii) whether the cost of producing quality involves fixed costs or variable costs; and (iv) the relative quality-production efficiencies of the competing firms. [ABSTRACT FROM AUTHOR]

Although the Consumer Welfare doctrine has served as an important feature of antitrust liability since the 1980s, the Department of Justice (DOJ) and Federal Trade Commission (FTC) have downplayed this factor in their respective Google and amended Facebook complaints. Each complaint makes a general reference to this issue, but with few detailed factual allegations. A complicating factor is that the defendants have gained dominant market positions by providing valuable digital services at little or no direct charge to consumers. In this paper, we emphasize that the services offered by the two platforms embody quality as well as price dimensions, both of which can affect consumers positively. Indeed, quality product dimensions may become even more important to consumers in a zero price environment. We construct a simple economic model using privacy as a significant quality attribute through which these issues can be explored, and then draw some appropriate policy conclusions. [ABSTRACT FROM AUTHOR]

Does entry and exit of competitors from broadband services markets have large effects on the quality of broadband plans offered to consumers? Answers to this question inform design of subsidies to improved broadband in underserved areas, and antitrust policy. The authors investigate quality effects of entry (or exit) in 2014 legacy (cable and digital subscriber line) duopoly residential markets. Entry or exit by legacy technology providers had large impacts on 2018 service quality, though impacts diminished rapidly with continued entry. Entry by a single fiber Internet service provider (ISP) had no impact on available quality; entry by more fiber ISPs had modest but statistically significant effects. [ABSTRACT FROM AUTHOR]

We analyse the effect of competition on quality provision in mixed markets, such as health care and education, where public and private providers coexist. We make two key assumptions about the public provider in such markets, namely that it faces a regulated price and is (partly) motivated. We find that increased competition has an a priori ambiguous effect on quality provided by the public provider, while the scope for a quality reduction by the private provider is larger. We also derive the first-best solution and show how it coincides with the Nash equilibrium of a private (symmetric) duopoly. [ABSTRACT FROM AUTHOR]

Quality competition and risk aversion have become more and more common in today's many industries, making it a challenge to supply chain management and coordination. This paper considers a vendor-managed inventory (VMI) supply chain comprising two risk-averse manufacturers who sell their competing products through a common retailer. Market demand shared by each manufacturer is dependent on the quality level of its own product as well as on the competitor's product quality. The Conditional Value-at-Risk (CVaR) criterion is employed to formulate the risk aversion of manufacturers. This study first develops basic models without coordination mechanism and analyzes the effect of the quality sensitivity, competition intensity, risk aversion degree and cost coefficient of quality improvement on equilibrium decisions and supply chain efficiency. Further, a combined contract composed of option and cost-sharing is proposed to investigate the supply chain coordination issue. The results reveal that the combined contract can coordinate the supply chain and achieve a win-win outcome only when the manufacturers are low in risk aversion, and the system-wide profit of the supply chain can be allocated arbitrarily only by the option price. Also, this research examines the effect of the quality sensitivity, competition intensity, risk aversion degree and cost coefficient of quality improvement on the feasible region of option price. [ABSTRACT FROM AUTHOR]

Background Transparency in quality of care is an increasingly important issue in healthcare. In many international healthcare systems, transparency in quality is crucial for health insurers when purchasing care on behalf of their consumers, for providers to improve the quality of care (if necessary), and for consumers to choose their provider in case treatment is needed. Conscious consumer choices incentivize healthcare providers to deliver better quality of care. This paper studies the impact of quality on patient volume and hospital choice, and more specifically whether high quality providers are able to attract more patients. Methods The dataset covers the period 2006-2011 and includes all patients who underwent a cataract treatment in the Netherlands. We first estimate the impact of quality on volume using a simple ordinary least squares (OLS), second we use a mixed logit to determine how patients make trade-offs between quality, distance and waiting time in provider choice. Results At the aggregate-level we find that, a one-point quality increase, on a scale of one to a hundred, raises patient volume for the average hospital by 2-4 percent. This effect is mainly driven by the hospital with the highest quality score: the effect halves after excluding this hospital from the dataset. Also at the individual-level, all else being equal, patients have a stronger preference for the hospital with the highest quality score, and appear indifferent between the remaining hospitals. Conclusion Our results suggest that the top performing hospital is able to attract significantly more patients than the remaining hospitals. We find some evidence that a small share of consumers may respond to quality differences, thereby contributing to incentives for providers to invest in quality and for insurers to take quality into account in the purchasing strategy.

This paper analyzes the entry of digital platforms such as Google into complementary hardware markets (e.g., internet service provision) using a game-theoretic model. Access to a platform's services often requires consumers to use a complementary hardware product or service, for example, internet service is needed to access the YouTube platform. Typically, such access products are provided by third-party firms. More recently, however, some major platforms such as Google have themselves ventured into providing these access products. For example, Google Fiber provides access to YouTube. In this paper, we examine the effect of a platform's entry into an access product market when the profits from the platform's advertising business depend upon the quality of the access products. We develop a theoretical model to study this context and find that such an entry by the platform (i) can lead the platform to provide a higher quality access product than the third-party firms at a lower price, (ii) may, in contrast to the entry by a third-party firm, lead to a higher quality access product by both the platform as well as the firms, (iii) improves the platform's profits because of increased advertising revenue and/or additional profits from the access product sales, and (iv) increases consumer surplus even though the platform becomes more dominant because of its entry into the access product market. All the results are driven by the positive association between the platform's advertising profits and the quality of access products in the market. [ABSTRACT FROM AUTHOR]

Many countries have opened their health care markets to private for-profit providers, aiming to promote quality and choice for patients. The prices are regulated and providers compete in location and quality. We show that whereas opening a public hospital market typically raises quality, the private provider strategically locates towards the corner of the market to avoid costly quality competition. Social welfare depends on the size of the regulator's budget and on the altruism of the public provider. If the budget is large, high quality results and welfare is highest in a duopoly whenever entry is optimal. If the budget is small, quality levels in a duopoly mirror the quality level in a monopoly. It can be optimal for the regulator not to use the full budget. [ABSTRACT FROM AUTHOR]

This study introduces a subsidy policy on product quality in a quality-then-price game to remedy the quality distortion under a mixed oligopoly (one public firm and one private firm) framework. We show that the multi-stage setting for firms is crucial for the validity of privatization neutrality. Since firms have different objectives, their asymmetric strategic consideration on price will spill over to the quality competition if there exists price differentiation in equilibrium under partial privatization. This spillover effect results in lower social welfare levels than the first-best outcome, and the neutrality of privatization in White (Economics Letters 53:189–195) no longer holds in our multi-stage model. Specifically, the optimal privatization policy is either fully public or completely private, where the social welfare attains the first-best outcome. [ABSTRACT FROM AUTHOR]

Considering and analyzing various kinds of cooperation among supply chain members is an option for better managing each channel. It is noteworthy that in many real‐world cases, each of vertical and horizontal cooperation has an important role in the success of supply chains. Nevertheless, only vertical cooperation in most previous research is considered. This paper addresses both vertical and horizontal cooperation in two competitive reverse supply chains, each of which includes one collector, one remanufacturer, and one retailer. Our primary concern is to analyze quality improvement competition between the remanufacturers. Moreover, retail price competition between the retailers and the quality competition are simultaneously considered in the extended model. In this research, the investigated system has been analyzed under different structures including decentralized, centralized, horizontal cooperation, and coordinated decision‐making models. The results show that when the remanufacturers cooperate horizontally, the profit of each collector and that of the retailer will decrease compared with those in the decentralized structure. To overcome this problem, a new coordination contract named multiple‐link two‐part tariff is proposed to simultaneously coordinate the members of each chain. The proposed contract effectively convinces the remanufacturers to participate in the coordination model instead of the horizontal cooperation. Moreover, it provides a win–win–win condition for all chain members and improves the quality level of the remanufactured products. The results indicate the proper performance of the proposed contract in improving the benefits of the competing chains, especially when there exists no intense competition between the remanufacturers (i.e., when the market sensitivity to the quality of the remanufactured products is low and consequently less effort is needed to increase the quality of the remanufactured products). Moreover, the proposed contract not only is able to simultaneously increase both remanufactured products demand and of end‐of‐life products supply but also involves both economic and environmental benefits. [ABSTRACT FROM AUTHOR]

Do apprenticeships enhance product quality? Whether guilds and apprenticeships have promoted technological change has been debated, but the issue remains unsettled because of the lack of data which allows us to empirically assess technological change by apprenticeships in the comparison with technological change by non-apprenticeships. By scrutinizing apprenticeships in the sake brewing industry and utilizing the national sake quality competition results and the master brewer list, this study examines to what extent the craftsmen trained through an apprenticeship enhanced or reduced product quality. The empirical results indicate that the training in apprenticeships actually decreases the probability of winning quality competitions, which indicates that apprenticeships do not improve product quality. Thus, we discuss why apprenticeships was a dominant form of training and learning, even if they had little bona fide utility for product quality. We show that brewers originally utilized apprenticeship-type practices adopted for migrant labor to reduce production costs. This study also shows that the breweries began to create a positive imagery associated with apprenticeships and sake quality from the 1980s even though apprenticeships actually reduce the probability of brewing high-quality sake. [ABSTRACT FROM AUTHOR]

The aim of this article is to investigate the impacts of cooperative and non-cooperative R&D strategies on product innovation and firm performance. Based on the industrial economics literature and the optimisation model, R&D competition, R&D cartelisation, and full industry cartelisation strategies of firms operating on a market with differentiated goods and simultaneous price and quality competition are considered. It is showed that R&D cartelisation entails a loss of firm's product innovation compared with R&D competition. However, profit-maximising firms do not prefer the R&D competition strategy. They prefer to pursue either R&D cartelisation or full industry cartelisation strategies, depending on the elasticity of demand with respect to the firm's investment in R&D. The social cost of R&D cartelisation is a loss of product innovation, and the social cost of full industry cartelisation is both the loss of product innovation and the loss of consumer surplus due to a relatively high price and low output of the final product. The latter results carry significant implications for the modern business and public policy. [ABSTRACT FROM AUTHOR]

In a vertical differentiation model, we study a market where consumers, depending on their level of environmental consciousness, value the greenness of the product they consume and are distributed according to a Kumaraswamy distribution. Three scenarios are studied: only one firm takes some green measures and firms compete upon prices; only one firm takes some green measures, and this firm acts as the leader of the price competition; and finally, both firms choose their level of greenness and compete upon their location and price. The results suggest that as consumers become more environmentally conscious, the marginal consumer and the greener firm’s location move to the right. In contrast, the less green firm’s response is non-monotonic. In fact, when the two firms choose their location along with their prices, the latter firm chooses to produce a less green product in response to more environmentally conscious consumers. In the extreme case where all consumers are fully environmentally conscious, the latter firm produces a brown product and sells it at a price equal to its marginal cost. In this case, the greener firm’s price and location choices make the consumers indifferent between the two products. These results could explain why despite all the improvements in the consumers’ environmental consciousness, brown (in its general term) products are still widely produced and consumed, even by environmentally conscious consumers.

The aim of this article is to investigate the impacts of cooperative and non-cooperative R&D strategies on product innovation and firm performance. Based on the industrial economics literature and the optimisation model, R&D competition, R&D cartelisation, and full industry cartelisation strategies of firms operating on a market with differentiated goods and simultaneous price and quality competition are considered. It is showed that R&D cartelisation entails a loss of firm’s product innovation compared with R&D competition. However, profit-maximising firms do not prefer the R&D competition strategy. They prefer to pursue either R&D cartelisation or full industry cartelisation strategies, depending on the elasticity of demand with respect to the firm’s investment in R&D. The social cost of R&D cartelisation is a loss of product innovation, and the social cost of full industry cartelisation is both the loss of product innovation and the loss of consumer surplus due to a relatively high price and low output of the final product. The latter results carry significant implications for the modern business and public policy.

It is prevalent for multinational firms (MNFs) to enter a market by importing products of superior quality, and then engage in local competition with domestic manufacturers (DMs). Alternatively, many MNFs voluntarily expose themselves to the risk of quality spillover by strategically sourcing from DMs to avoid the tariff burden. In this paper, we consider a DM and an MNF that strategically choose whether to source from the DM, and characterize the tradeoff between the tariff burden and the potential loss due to quality spillover. We analyze the supply chain parties' preferences over the MNF's sourcing strategies and the impact of the government's tariff regulation. We show that the MNF prefers domestic sourcing (DS) when the risk of quality spillover is low, while the manufacturer usually sees an opposite preference. However, we find that there exists a win‐win zone where both MNF and DM prefer the MNF's domestic sourcing simultaneously. From the government's perspective, DS always results in more output of high‐quality products, and more social welfare when quality spillover is sufficiently valuable. Interestingly, we find that, even if the quality spillover is limited, more social welfare can be obtained under DS, if the tariff rate is either low or high. The government is hence able to facilitate the incentive alignment between the MNF and the DM by adjusting the tariff regulation, which improves product quality and social welfare in the domestic market, although there exist some danger zones where the regulation is inefficient. [ABSTRACT FROM AUTHOR]

This paper investigates two stylised facts about quality wars between Northern firms and a Southern copycat firm in the North. First, due to low wage, a foreign or Southern copycat firm may enter the market of a developed economy inhabited by a high‐quality firm and a low‐quality domestic copycat. When the products of the high‐quality firm and the foreign copycat are vertically differentiated, the foreign copycat firm may choose an intermediate quality between the quality levels of domestic high‐ and low‐quality firms. In the second scenario where the products of the high‐quality firm and the foreign copycat are horizontally differentiated, the quality of the foreign copycat may surpass that of the domestic high‐quality firm. As the wage gap between the developed and developing countries widens, the foreign copycat is more likely to survive in the markets of developed economies. [ABSTRACT FROM AUTHOR]

This article is set against the Court of Justice of the European Union's (CJEU) decisions in Pierre Fabre and Coty Germany GmbH , observing that in the digital economy, price is no longer the sole important parameter of competition and that competition law therefore has to reconstruct the theoretical background required to explain the tensions contained in the design of concentrated marketplaces. As the CJEU's approach taken in Pierre Fabre and Coty shows, competition authorities and courts also need to consider the market's distinct psychological properties when they contemplate the legal framework that governs it. The article thus explains the CJEU's decisions not against the well-known debate about inter- and intrabrand competition but with reference to the notion of creating distinct types of 'variety' in the marketplace so as to enable consumers to choose not just between the alternative options that they face but also to enable them to make decisions that will shape the manner in which they think about whether they should consider alternative options at all. The article's findings aim to advance debates about the overarching policy goals of the way in which digital markets ought to be regulated. [ABSTRACT FROM AUTHOR]

This article proposes a differential game model, in order to analyze markets in which regional regulation is operative and competition is based on quality. The case we have in mind is healthcare public service, where consumers (patients) choose the provider mainly basing on the providers' location and the quality of services, while prices play a more limited role. In most European countries, within the same State, regional (or local) providers compete on quality to attract demand. Market regulation is set at national and/or regional level. Our model highlights the features of equilibrium in such a framework and specifically investigates how the differences in product quality evolve among regions and how inter-regional demand flows behave. Differently from some available similar models, that do not take into account the regional dimension of the decision process, we find that quality differentials among regions may persist in equilibrium. [ABSTRACT FROM AUTHOR]

Background: Transparency in quality of care is an increasingly important issue in healthcare. In many international healthcare systems, transparency in quality is crucial for health insurers when purchasing care on behalf of their consumers, for providers to improve the quality of care (if necessary), and for consumers to choose their provider in case treatment is needed. Conscious consumer choices incentivize healthcare providers to deliver better quality of care. This paper studies the impact of quality on patient volume and hospital choice, and more specifically whether high quality providers are able to attract more patients. Methods: The dataset covers the period 2006-2011 and includes all patients who underwent a cataract treatment in the Netherlands. We first estimate the impact of quality on volume using a simple ordinary least squares (OLS), second we use a mixed logit to determine how patients make trade-offs between quality, distance and waiting time in provider choice. Results: At the aggregate-level we find that, a one-point quality increase, on a scale of one to a hundred, raises patient volume for the average hospital by 2-4 percent. This effect is mainly driven by the hospital with the highest quality score: the effect halves after excluding this hospital from the dataset. Also at the individual-level, all else being equal, patients have a stronger preference for the hospital with the highest quality score, and appear indifferent between the remaining hospitals. Conclusion: Our results suggest that the top performing hospital is able to attract significantly more patients than the remaining hospitals. We find some evidence that a small share of consumers may respond to quality differences, thereby contributing to incentives for providers to invest in quality and for insurers to take quality into account in the purchasing strategy. [ABSTRACT FROM AUTHOR]

One of the negative side effects of the consumer society and the increasing number of consumer goods available to the average household is the intransparency of product quality, especially product lifetime. There are many examples on failing products and premature obsolescence. Often this phenomenon is related to companies’ profit maximization strategies (planned obsolescence) and consumer protection policy is mobilized to stop this type of exploitation. The paper applies micro-economic analysis to discuss the problem of optimal product quality (e.g. lifetime) in terms of cost-benefit-analysis and under imperfect information (based on Akerlof’s lemon problem). Given consumers’ actual willingness to pay there is an optimal quality which is lower than the technically possible. If the innovation perspective (Schumpeter’s “creative destruction”) is added to the analysis, increasing global competition and speed of product innovation are identified as core drivers for shorter product lifecycles and tend to be the actual limiting factor of product lifetime (economic vs. technical obsolescence). Even if the goals of sustainable development are included in the analysis, this does not provide an unambiguous argument for long-life products as new products tend to be more eco-efficient. A broader discussion on optimal quality (lifetime) of products is necessary, based on holistic life-cycle assessment of alternative product quality options. And finally: The tendency of increasing aftersales disappointment of consumers’ expectations and conflicts with sustainable development goals need to be addressed in a more general debate on (limits of) consumerism. Minor changes in the laws for protecting consumers (e.g. longer warranty) will not do the job.

In several countries, health care services are provided by public and/or private subjects, and they are reimbursed by the government, on the basis of regulated prices (in most countries, diagnosis-related group). Providers take prices as given and compete on quality to attract patients. In some countries, regulated prices differ across regions. This paper focuses on the interdependence between regional regulators within a country: It studies how price setters of different regions interact, in a simple but realistic framework. Specifically, we model a circular city as divided in two administrative regions. Each region has two providers and one regulator, who sets the local price. Patients are mobile and make their choice on the basis of provider location and service quality. Interregional mobility occurs in the presence of asymmetries in providers' cost efficiency, regulated prices, and service quality. We show that the optimal regulated price is higher in the region with the more efficient providers; we also show that decentralisation of price regulation implies higher expenditure but higher patients' welfare. [ABSTRACT FROM AUTHOR]

On the basis of a Salop model with regulated prices, we investigate quality provision behaviour of competing hospitals before and after a merger. For this, we use a controlled laboratory experiment where subjects decided on the level of treatment quality as head of a hospital. We find that the post-merger average quality is significantly lower than the average pre-merger quality. However, for merger insiders and outsiders, average quality choices are significantly higher than predicted for pure profit-maximising hospitals. This upward deviation is potentially driven by altruistic behaviour towards patients. Furthermore, we find that in the case where sufficient cost synergies are realised by the merged hospitals, there is a significant increase in average quality choices compared to the scenario without synergies. Finally, we find that our results do not change when comparing individual decisions to team decisions. [ABSTRACT FROM AUTHOR]

ABSTRACT In this study, we analyze the regulation of markets for the provision of services whose costs are subsidized for paternalistic reasons. We model the choice of a benevolent regulator who wants to maximize consumer welfare in a setting where quality cannot be verified and the good provided is fully subsidized. The choice is thus made between two types of providers (profit maximizers and altruistic providers) and two frameworks (monopoly franchise and quality competition). Our analysis shows that in this environment the performance of mixed markets is always dominated by pure forms. Moreover, although making efficient providers compete for the market minimizes cost, the choice of quality competition with altruistic providers may be preferable from a welfare point of view whenever service quality is relevant and the productivity differential is not substantial. [ABSTRACT FROM AUTHOR]

We study the effects of a hospital merger in a spatial competition framework where semi-altruistic hospitals choose quality and cost-containment effort. Whereas a merger always leads to higher average cost efficiency, the effect on quality provision depends on the strategic nature of quality competition, which in turn depends on the degree of altruism and the effectiveness of cost-containment effort. If qualities are strategic complements, then a merger leads to lower quality for all hospitals. If qualities are strategic substitutes, then a merger leads to higher quality for at least one hospital, and might also yield higher average quality provision and increased patient utility. [ABSTRACT FROM AUTHOR]

This paper examines if and how incumbent firms may adjust their quality provisions in response to entry, with particular attention to the role of financial conditions. Data comes from the U.S. aviation industry where Southwest Airlines, a leading low-cost carrier, has actively entered a large number of routes in the past decades. Using on-time performance to proxy for service quality, I find robust evidence that financial pressure significantly affects the quality changes of incumbents. While incumbents in good financial health enhance quality when responding to entry, those experiencing financial distress exhibit a different tendency and deteriorate quality. These findings highlight the impact of financing on product market competition and shed light on why previous research has found mixed results regarding the link between competition and service quality in the airline industry. • This article studies how the financial health of airlines interacts with their strategic responses to Southwest's entry. • Financially sound incumbents respond by improving on-time performance and slightly lowering prices. • In contrast, financially distressed incumbents respond by worsening on-time performance and slashing prices. • The findings explain why previous works have found mixed results on the link between competition and quality. [ABSTRACT FROM AUTHOR]

Background: Poor medical care and high fees are two major problems in the world health care system. As a result, health care insurance system reform is a major issue in developing countries, such as China. Governments should take the effect of health care insurance system reform on the competition of hospitals into account when they practice a reform. This article aims to capture the influences of asymmetric medical insurance subsidy and the importance of medical quality to patients on hospitals competition under non-price regulation. Methods: We establish a three-stage duopoly model with quantity and quality competition. In the model, qualitative difference and asymmetric medical insurance subsidy among hospitals are considered. The government decides subsidy (or reimbursement) ratios in the first stage. Hospitals choose the quality in the second stage and then support the quantity in the third stage. We obtain our conclusions by mathematical model analyses and all the results are achieved by backward induction. Results: The importance of medical quality to patients has stronger influence on the small hospital, while subsidy has greater effect on the large hospital. Meanwhile, the importance of medical quality to patients strengthens competition, but subsidy effect weakens it. Besides, subsidy ratios difference affects the relationship between subsidy and hospital competition. Furthermore, we capture the optimal reimbursement ratio based on social welfare maximization. More importantly, this paper finds that the higher management efficiency of the medical insurance investment funds is, the higher the best subsidy ratio is. Conclusions: This paper states that subsidy is a two-edged sword. On one hand, subsidy stimulates medical demand. On the other hand, subsidy raises price and inhibits hospital competition. Therefore, government must set an appropriate subsidy ratio difference between large and small hospitals to maximize the total social welfare. For a developing country with limited medical resources and great difference in hospitals such as China, adjusting the reimbursement ratios between different level hospitals and increasing medical quality are two reasonable methods for the sustainable development of its health system. [ABSTRACT FROM AUTHOR]

This paper proposes a theory to explain the relative wage-rate increase for skilled labor that results from trade liberalization that relies on within-sector reallocations of production resources (skilled and unskilled labor) across firms. Motivated by some stylized facts, in a model with firm heterogeneity, including firms that differ in their skill intensity even within a narrowly defined industry, firms with relatively high skill intensity that are more likely to be exporters, and a positive association between a firm's skill intensity and its product quality, I develop a general equilibrium model where firms with a higher skill intensity endogenously choose a higher-quality product, and tend to be more profitable. In this framework, a reduction in trade costs allows members of the workforce to reallocate to more efficient firms that produce higher-quality products, using their skilled labor more intensively, resulting in a rising skill premium. The main sources of the increasing wage inequality that followed trade openness are a positive link between a firm's skill intensity, its product quality, and quality competition. [ABSTRACT FROM AUTHOR]

This paper analyzes quality choice of hospitals subject to the union structure. For this purpose we extend the spatial two hospital competition model developed by Montefiori (Eur J Health Econ 6:131-135, ). We investigate the impact of different spatial wage bargaining schemes-(1) every hospital has a separate union and (2) one overall union for all hospitals in the spatial market. We find that if every hospital has a separate union wages are higher and the hospital's quality is lower than in the case of one overall union which negotiate the same wage for personnel in all hospitals. Furthermore we show, in the separate union case that the health insurance has to pay a higher amount to ensure the same quality level. Finally we demonstrate that one overall union case is more efficient to the health insurance to increase the hospital's quality. If the health insurance is part of the social security system the policymaker can possibly set a law framework for negotiations to obtain the efficient case. [ABSTRACT FROM AUTHOR]

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We study the equilibrium and its stability property in a duopoly market in which minimum quality standards (MQS) are set, prices are regulated with links to product quality, and firms compete in quality. The adjustment dynamics are studied, under the assumption that quality is a sticky variable. We focus on the role that MQS play, in affecting equilibrium allocations and the system dynamic properties. In particular, we show that chaotic dynamics may emerge, precisely due to MQS; under specific circumstances, MQS are responsible for the outcome of maximal differentiation in product qualities across providers. [ABSTRACT FROM AUTHOR]

In this paper, we develop a supply chain network game theory model with product differentiation, possible outsourcing of production and distribution, and quality and price competition. The original firms compete with one another in terms of in-house quality levels and product flows, whereas the contractors, aiming at maximizing their own profits, engage in competition for the outsourced production and distribution in terms of prices that they charge and their quality levels. The solution of the model provides each original firm with its optimal in-house quality level as well as its optimal in-house and outsourced production and shipment quantities that minimize the total cost and the weighted cost of disrepute, associated with lower quality levels and the impact on a firm's reputation. The governing equilibrium conditions of the model are formulated as a variational inequality problem. An algorithm, which provides a discrete-time adjustment process and tracks the evolution of the product flows, quality levels, and prices over time, is proposed and convergence results given. Numerical examples are provided to illustrate how such a supply chain network game theory model can be applied in practice. The model is relevant to products ranging from pharmaceuticals to fast fashion to high technology products. [ABSTRACT FROM AUTHOR]

We examine if and how incumbent firms respond to entry and entry threats using nonprice modes of competition. Our analysis focuses on airline service quality. We find that incumbent on-time performance (OTP) actually worsens in response to entry, and even entry threats, by Southwest Airlines. Since Southwest is both a top-performing airline in OTP and a low-cost carrier (LCC), we conjecture that this response by incumbents may be due to a cost-cutting strategy that allows for intense postentry price competition along with preentry deterrence, or it may be due to a postentry differentiation strategy along with preentry accommodation. Further analysis of entry and entry threats by other airlines is inconclusive, providing evidence that is partially consistent with both hypotheses. Nonetheless, the phenomenon of worsening OTP can only be observed when the (potential) entrant is a LCC (Southwest, Jet Blue, and AirTran). [ABSTRACT FROM AUTHOR]

This paper develops a game theory model of a service-oriented Internet in which profit-maximizing service providers provide substitutable (but not identical) services and compete with the quantities of services in a Cournot-Nash manner, whereas the network transport providers, which transport the services to the users at the demand markets, and are also profit-maximizers, compete with prices in Bertrand fashion and on quality. The consumers respond to the composition of service and network provision through the demand price functions, which are both quantity and quality dependent. We derive the governing equilibrium conditions of the integrated game and show that it satisfies a variational inequality problem. We then describe the underlying dynamics, and provide some qualitative properties, including stability analysis. The proposed algorithmic scheme tracks, in discrete-time, the dynamic evolution of the service volumes, quality levels, and the prices until an approximation of a stationary point (within the desired convergence tolerance) is achieved. Numerical examples demonstrate the modeling and computational framework. [ABSTRACT FROM AUTHOR]