We present a theoretical analysis of the effect of dielectric confinement on the Coulomb interaction in dielectrically modulated quantum structures. We discuss the implications of the strong enhancement of the electron-hole and electron-electron coupling for two specific examples: (i) GaAs-based quantum wires with remote oxide barriers, where combined quantum and dielectric confinements are predicted to lead to room temperature exciton binding, and (ii) semiconductor quantum dots in colloidal environments, where the many-body ground states and the addition spectra are predicted to be drastically altered by the dielectric environment.
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