The Curious Case of Competition and Quality

43 Pages Posted: 12 Sep 2014 Last revised: 24 Sep 2015

See all articles by Ariel Ezrachi

Ariel Ezrachi

University of Oxford - Faculty of Law

Maurice E. Stucke

The Konkurrenz Group; University of Tennessee College of Law

Date Written: October 1, 2014

Abstract

Alongside the consideration of price, competition authorities recognize that quality can be as, if not more, important in some markets. But as competition authorities also recognize, identifying the dimensions of competition important to many consumers is difficult. Even when these dimensions of quality are identified, measuring them represents additional challenges.

To circumvent these challenges, competition authorities rely on several heuristics when assessing a merger’s, cartel’s or monopolistic restraint’s impact on quality. Often the heuristics work well for the competition authorities.

Our paper, however, identifies several scenarios where these heuristics break down, when competition and quality are not positively correlated, and when an increase in competition can actually reduce consumer welfare. We also identify two necessary, but not sufficient, conditions that are common to every scenario.

With these two conditions in mind, we provide instances when an increase in competition will not increase quality (when one would expect it should). We also provide instances when an increase in competition will lead to quality degradation.

Keywords: Competition Policy, Antitrust, Two-Sided Markets, Quality, Behavioral Exploitation, Behavioral Economics, Deception, Choice Overload

JEL Classification: D63, L15, D43, K21, L40

Suggested Citation

Ezrachi, Ariel and Stucke, Maurice E., The Curious Case of Competition and Quality (October 1, 2014). Journal of Antitrust Enforcement (2015) doi: 10.1093/jaenfo/jnv023; University of Tennessee Legal Studies Research Paper No. 256; Oxford Legal Studies Research Paper No. 64/2014. Available at SSRN: https://ssrn.com/abstract=2494656 or http://dx.doi.org/10.2139/ssrn.2494656

Ariel Ezrachi

University of Oxford - Faculty of Law ( email )

Oxford
United Kingdom

Maurice E. Stucke (Contact Author)

The Konkurrenz Group ( email )

5335 Wisconsin Ave., NW
Suite 440
Washington, DC 20015
United States

University of Tennessee College of Law ( email )

1505 W. Cumberland Ave.
Knoxville, TN 37996
United States
865-974-9816 (Phone)

HOME PAGE: http://law.utk.edu/people/maurice-stucke/

Register to save articles to
your library

Register

Paper statistics

Downloads
861
rank
24,921
Abstract Views
5,859
PlumX