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Selection, heterogeneity and entry in liberal professions

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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.

Citation

(2014). Selection, heterogeneity and entry in liberal professions. Journal of Economics and Management Strategy, 925 -951. https://doi.org/10.1111/jems.12074

Acceptance Date Jan 1, 2014
Publication Date Oct 25, 2014
Journal Journal of Economics and Management Strategy
Print ISSN 1058-6407
Publisher Wiley
Pages 925 -951
DOI https://doi.org/10.1111/jems.12074
Keywords Liberal professions, Cost heterogeneity, Entry regulation, Localized competition
Publisher URL https://doi.org/10.1111/jems.12074

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