Virendra Ajodhia, Konstantin Petrov, Gian Carlo Scarsi, Bart Franken
Both theory and practice suggest that incentive price regulation, without additional quality measures, eventually leads to quality degradation: the strong cost reduction incentives (driven by the profit incentive) have the perverse effect of inducing sub-standard quality levels. Thus, under economic regulation models using incentive schemes, quality regulation becomes imperative.
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