Selection, Heterogeneity and Entry in Professional Markets

41 Pages Posted: 28 Dec 2012

See all articles by Marco Alderighi

Marco Alderighi

Università della Valle d'Aosta; Bocconi University

Claudio A. Piga

Università degli Studi di Genova - Economics

Date Written: December 28, 2012

Abstract

We analyze two different cases of entry regulation in professional markets: first, when licensing is a requirement for becoming a professional (lawyers); second, when entry and price restrictions are applied on a geographical basis (pharmacists). Both cases are investigated within a circular model of localized competition and heterogeneous players. The analysis reveals that licensing introduces a selection mechanism which is effective in preventing entry of inefficient players in markets with large ex-ante heterogeneity. Furthermore, because in the second case excessive entry is reduced as the degree of heterogeneity increases, our analysis lends support to a policy that simultaneously relaxes entry and price restrictions.

Keywords: Liberal professions, Cost/quality heterogeneity, Entry regulation, Localized competition

JEL Classification: L11, D61

Suggested Citation

Alderighi, Marco and Piga, Claudio A., Selection, Heterogeneity and Entry in Professional Markets (December 28, 2012). Available at SSRN: https://ssrn.com/abstract=2194391 or http://dx.doi.org/10.2139/ssrn.2194391

Marco Alderighi

Università della Valle d'Aosta ( email )

Strada dei Cappuccini 2/A
Aosta, 11100
Italy

Bocconi University ( email )

Via Sarfatti 25
20136 Milan, MI 20136
Italy

Claudio A. Piga (Contact Author)

Università degli Studi di Genova - Economics ( email )

Via Vivaldi, 5 - 16126 Genov
Genoa
Italy

HOME PAGE: http://https://sites.google.com/view/claudiopiga/home?authuser=0

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