A new rationale for cost reimbursement: price regulation with horizontal and vertical di ff erentiation. David Bardey 1 , Chiara Canta 2 and Jean-Marie Lozachmeur 3 January 8, 2010 1 Ecole Polytechnique de Paris, Toulouse School of Economics (GREMAQ) and University of Rosario (Bogota). 2 Toulouse School of Economics (GREMAQ). 3 Toulouse School of Economics (IDEI and GREMAQ-CNRS).Corresponding Author: Jean-Marie Lozachmeur, Manufacture des Tabacs, 21 Allée de Brienne, F-31000 Toulouse. jean-marie.lozachmeur@univ-tlse1.fr. Tel: +33(0)561128564.