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A Reexamination of Yardstick Competition

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  • Joel Sobel

Abstract

This paper shows that yardstick competition does not assist a regulator when lump-sum transfers are not costly and the regulator does not care about the distribution of income. Yardstick competition may discourage investment that would make efficient operation possible. The paper characterizes optimal regulatory schemes in a simple model and demonstrates that it may be optimal to limit the amount of information available to the regulator. Copyright (c) 1999 Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

Volume (Year): 8 (1999)
Issue (Month): 1 (03)
Pages: 33-60

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Handle: RePEc:bla:jemstr:v:8:y:1999:i:1:p:33-60

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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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Cited by:
  1. Potters, Jan & Rockenbach, Bettina & Sadrieh, Abdolkarim & van Damme, Eric, 2004. "Collusion under yardstick competition: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 22(7), pages 1017-1038, September.
  2. Antoine Faure-Grimaud & Sonje Reiche, 2003. "Dynamic yardstick regulation," LSE Research Online Documents on Economics 19319, London School of Economics and Political Science, LSE Library.
  3. Georg Meran & Christian von Hirschhausen, 2006. "A Modified Yardstick Competition Mechanism," Working Papers 2006-05, Center for Network Industries and Infrastructure (CNI).
  4. Faure-Grimaud, Antoine & Reiche, Sönje Kerrin, 2003. "Dynamic Yardstick Regulation," CEPR Discussion Papers 4035, C.E.P.R. Discussion Papers.
  5. Tangerås, Thomas P., 1999. "Collusion-Proof Yardstick Competition," Seminar Papers 674, Stockholm University, Institute for International Economic Studies.
  6. Tangerås, Thomas P., 2002. "Regulation of Cost and Quality under Yardstick Competition," Working Paper Series 573, Research Institute of Industrial Economics.
  7. Antoine Faure-Grimaud & Soenje Reiche, 2003. "Dynamic Yardstick Regulation," STICERD - Theoretical Economics Paper Series 459, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  8. Ingo Vogelsang, 2010. "Incentive Regulation, Investments and Technological Change," CESifo Working Paper Series 2964, CESifo Group Munich.
  9. Faure-Grimaud, A. & Reiche, S., 2006. "Dynamic yardstick mechanisms," Games and Economic Behavior, Elsevier, vol. 54(2), pages 316-335, February.
  10. Marques, Rui Cunha, 2006. "A yardstick competition model for Portuguese water and sewerage services regulation," Utilities Policy, Elsevier, vol. 14(3), pages 175-184, September.
  11. J.A. den Hertog, 2010. "Review of economic theories of regulation," Working Papers 10-18, Utrecht School of Economics.
  12. Haldun Evrenk & E. Zenginobuz, 2010. "Regulation through a revenue contest," Journal of Economics, Springer, vol. 99(3), pages 211-237, April.
  13. Facanha, Luis Otavio & Resende, Marcelo, 2004. "Price cap regulation, incentives and quality:: The case of Brazilian telecommunications," International Journal of Production Economics, Elsevier, vol. 92(2), pages 133-144, November.
  14. V. Bhaskar & Bishnupriya Gupta & Mushtaq Khan, 2002. "Partial Privatization and Yardstick Competition: Evidence from Employment Dynamics in Bangladesh," Economics Discussion Papers 545, University of Essex, Department of Economics.
  15. Fumitoshi Mizutani & Hideo Kozumi & Noriaki Matsushima, 2009. "Does yardstick regulation really work? Empirical evidence from Japan’s rail industry," Journal of Regulatory Economics, Springer, vol. 36(3), pages 308-323, December.

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