  (Abridged) We explore the idea that the anti-hierarchical turn-off observed
in the quasar population arises from self-regulating feedback, via an outflow
mechanism. Using a detailed hydrodynamic simulation we calculate the luminosity
function of quasars down to a redshift of z=1 in a large, cosmologically
representative volume. Outflows are included explicitly by tracking halo
mergers and driving shocks into the surrounding intergalactic medium. Our
results are in excellent agreement with measurements of the spatial
distribution of quasars, and we detect an intriguing excess of galaxy-quasar
pairs at very short separations. We also reproduce the anti-hierarchical
turnoff in the quasar luminosity function, however, the magnitude of the
turn-off falls short of that observed as well as that predicted by analogous
semi-analytic models. The difference can be traced to the treatment of gas
heating within galaxies. The simulated galaxy cluster L_X-T relationship is
close to that observed for z~1 clusters, but the simulated galaxy groups at z=1
are significantly perturbed by quasar outflows, suggesting that measurements of
X-ray emission in high-redshift groups could well be a "smoking gun" for the
AGN heating hypothesis.
