Can minimum prices assure the quality of professional services?

This paper studies the effects of a minimum price fixed by a bureaucratic non-monopolistic professional association on service quality and consumer surplus. It shows that the price set by a Niskanen-type professional association will maximize consumer surplus only if consumers demand the highest possible average quality. If consumers demand services of lesser quality, the association's price will be too high if measured by consumer surplus. Moreover we show that a deregulated market will always reproduce the favorable result of a uniformly high price in the case of top quality demand, while delivering superior results in the case of a mixed demand for high and low quality services.