Monopoly, Quality, and Regulation

TLDR

Abstract

* The argument in this paper reduces to three basic points. Under regimes of monopoly (and monopolistic competition), product characteristics (which are often endogenous variables) are not usually optimally set under the pressure of market forces. Second, regulation is also beset with difficulties when price and quality are decision variables. These difficulties are informational, and are closely related to the sources of market failure in the unregulated market. Third, rate of return regula