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- Title
Monopolistic Competition and Exclusive Quality.
- Authors
Ortiz-Ospina, Esteban
- Abstract
In this paper I adapt a classic model of monopolistic competition where products are differentiated by quality, in order to study a market in which high-quality products can only be enjoyed by users with sufficient ability. Casting the model in the context of higher education - where selective colleges pledge quality by excluding lowability students -, I show that there are two equilibrium market segmentations: one in which highly selective colleges serve high-income high-ability students, and another in which highly selective colleges are cheaper than the less selective competitors that cater to low-ability high-income students. I provide an example to illustrate the welfare implications of these two market configurations.
- Subjects
MONOPOLISTIC competition; UNIVERSITIES &; colleges; LOW-income students; HIGHER education; QUALITY assurance
- Publication
B.E. Journal of Economic Analysis & Policy, 2017, Vol 17, Issue 2, p55
- ISSN
2194-6108
- Publication type
Article
- DOI
10.1515/bejeap-2016-0036