Entry restrictions and the determination of quality |
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Authors: | Walter Garcia-Fontes Hugo Hopenhayn |
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Institution: | (1) Universitat Pompeu Fabra, Department of Economics, Ramon Trias Fargas 25–27, 08005 Barcelona, Spain (e-mail: wgarcia@upf.es), ES;(2) University of Rochester,;(3) Universidad Torcuato Di Tella, Mi nones 2177, C1428 ATG Buenos Aires, Argentina, AR |
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Abstract: | Entry restrictions are a common form of regulation in markets and occupations, either as a means of limiting the size of
a market or affecting the quality of products or services provided by it. This paper analyzes demand, cost and informational
characteristics that affect the impact of this type of policies on the quality mix of products provided by an industry and
the welfare of its consumers. Selective increases in the costs of entry such as licensing requirements and direct restrictions
with competitive bidding for entry rights are considered. We analyze the effects of these policies on entry decisions and
also the additional selection effects that are obtained when exit is allowed for and the rights to participate in an industry
can be freely traded. |
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Keywords: | JEL classification: D45 D82 L15 L50 |
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