Price Floors and Quality Choice
نویسنده
چکیده
This paper studies effects of price floors in a simple model of vertical product differentiation. We find that even non-binding price floors can increase quality on the market, if the cost of quality is sufficiently low. Where a binding price floor does not change the equilibrium quality, it makes consumers worse off. There is also a possibility of overinvestment into quality as a result of the binding minimum price. JEL Codes: D43, L13, L51
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