Competition policy, regulation and the institutional design of industry supervision
AbstractWe study the welfare impact of enforcing a competitive behavior from an unregulated fringe competing with a regulated dominant operator with imperfectly differentiated goods. The fringe is potentially collusive but may be supervised by a competition authority. We show that the complementarity/substitutability between regulation and competition policy strongly depends on the nature of the market interaction. Forcing the fringe to adopt a competitive behavior always benefits consumers. However, it also affects the amount of subsidy that must be provided to the regulated firm for cost-reimbursement purposes, which has a social cost when public funds are costly. With complements, antitrust intervention is always welfare-improving. It is also preferable with weak substitutes but is detrimental to welfare for strong substitutes.
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Bibliographic InfoArticle provided by De Boeck Université in its journal Recherches économiques de Louvain.
Volume (Year): 70 (2004)
Issue (Month): 2 ()
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Web page: http://www.cairn.info/revue-recherches-economiques-de-louvain.htm
Other versions of this item:
- Cécile AUBERT & Jérôme POUYET, 2004. "Competition policy, regulation and the institutional design of industry supervision," Discussion Papers (REL - Recherches Economiques de Louvain) 2004022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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