Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324528 
Year of Publication: 
2020
Citation: 
[Journal:] Central European Economic Journal (CEEJ) [ISSN:] 2543-6821 [Volume:] 7 [Issue:] 54 [Year:] 2020 [Pages:] 218-226
Publisher: 
Sciendo, Warsaw
Abstract: 
Professions such as doctors and lawyers often enjoy some degree of self-regulation, i.e. they can set the codes of conduct in the market and even determine the rules for joining the profession. We address the problem of the optimal scope of self-regulation. Specifically, we model a profession that can decide about the quality of the service, and we examine if the profession should also be allowed to determine the number of suppliers. We assume that a larger number of professionals reduce the fixed cost of providing quality, and hence the motive to restrict entry is mitigated. Nonetheless, we find that for well-behaved fixed costs functions, the size of the profession preferred by the professionals is smaller than the socially optimal one. Still, if the only alternative to self-regulation is free entry to the profession, then self-regulation is the preferable regime. These findings are relevant for the services that are difficult to substitute by the services produced outside the profession.
Subjects: 
professions
self-regulation
oligopoly
vertical product differentiation
JEL: 
L13
L84
D69
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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