Price controls spark fierce non-price competition, reshaping markets for quality goods.
Price controls in markets can disrupt the idea of competitive balance. A study looked at how price limits impact competition in markets with different product qualities. They found that when prices are controlled, traditional competitive balance may not exist. Instead, markets see a shift towards non-price competition, where quality becomes a key factor. Through experiments, they confirmed that price restrictions lead to agents competing on quality rather than just price, resulting in market outcomes that align with their model's predictions.