<abstract xmlns="http://www.w3.org/1999/xhtml"><p>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.</p></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.

A note on the optimal scope of professional self-regulation

Central European Economic Journal

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"A note on the optimal scope of professional self-regulation"}

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...

A note on the optimal scope of professional self-regulation

Published Online: Dec 12, 2020

Page range: 218 - 226

DOI: https://doi.org/10.2478/ceej-2020-0008

Keywords
professions, self-regulation, oligopoly, vertical product differentiation

© 2020 Krzysztof Szczygielski, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

A note on the optimal scope of professional self-regulation

Published Online: Dec 12, 2020

Page range: 218 - 226

DOI: https://doi.org/10.2478/ceej-2020-0008

Keywordsprofessions, self-regulation, oligopoly, vertical product differentiation

© 2020 Krzysztof Szczygielski, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
professions, self-regulation, oligopoly, vertical product differentiation