Can Competition Keep the Restrooms Clean? Price, Quality and Spatial Competition

Dieter Pennerstorfer

doi:10.1016/j.regsciurbeco.2017.02.005

Can Competition Keep the Restrooms Clean? Price, Quality and Spatial Competition

Dieter Pennerstorfer

Department of Economics (Weiss)

Publication: Scientific journal › Journal article › peer-review

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Abstract

This article investigates the influence of competition on price and product quality among Austrian camping sites, a market characterized by both horizontal (spatial) and vertical product differentiation. Theoretically, the effect of competition on quality is ambiguous and depends on the degree of cost substitutability between output and quality. Estimating a system of equations shows that intense competition has a positive impact on product quality and a negative effect on prices (conditional on quality). As high quality is associated with high prices, the total effect of competition on prices is rather small.

Original language	English
Pages (from-to)	117 - 136
Journal	Regional Science and Urban Economics
Volume	64
DOIs	https://doi.org/10.1016/j.regsciurbeco.2017.02.005
Publication status	Published - 2017

Austrian Classification of Fields of Science and Technology (ÖFOS)

502013 Industrial economics
507016 Regional economy

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Pennerstorfer 2017 RSUE Can Competition Keep the Restrooms Clean Accepted ManuscriptAccepted author manuscript, 541 KBLicence: CC BY-NC-ND

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abstract = "This article investigates the influence of competition on price and product quality among Austrian camping sites, a market characterized by both horizontal (spatial) and vertical product differentiation. Theoretically, the effect of competition on quality is ambiguous and depends on the degree of cost substitutability between output and quality. Estimating a system of equations shows that intense competition has a positive impact on product quality and a negative effect on prices (conditional on quality). As high quality is associated with high prices, the total effect of competition on prices is rather small.",

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AB - This article investigates the influence of competition on price and product quality among Austrian camping sites, a market characterized by both horizontal (spatial) and vertical product differentiation. Theoretically, the effect of competition on quality is ambiguous and depends on the degree of cost substitutability between output and quality. Estimating a system of equations shows that intense competition has a positive impact on product quality and a negative effect on prices (conditional on quality). As high quality is associated with high prices, the total effect of competition on prices is rather small.

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