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Abstract

We consider a regulation problem with complete contracting in a principal-agent model with adverse selection and review within this model the various channels by which external competition parameters affect incentives within the regulated firm. The channels are: the principal's information, the principal's objective function, the agent's incentive constraint, the agent's participation constraint. We consider in particular a better information structure, a threat of liquidation, a fight for talent, a more efficient private sector, and the existence of better substitutes. We characterize in each case the conditions under which the effect on incentives is positive.

Nous analysons dans un modèle principal-agent avec sélection adverse et contrats complets comment les incitations dans une entreprise réglementée sont affectées par la concurrence externe à travers son effet sur l'information et la fonction objectif du principal d'une part et les contraintes de compatibilité incitative et de rationalité individuelle de l'agent d'autre part. Nous considérons plus précisément les sources suivantes de pressions concurrentielles accrues: une meilleure structure d'information, une menace plus forte de liquidation, une concurrence plus intense pour le talent, un secteur privé plus efficace, et l'existence de meilleurs substituts. Nous caractérisons dans chaque cas les conditions sous lesquelles l'effet sur les incitations est positif.

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(This abstract was borrowed from another version of this item.)

(This abst

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 87 (2003)
Issue (Month): 9-10 (September)
Pages: 2369-2396

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Handle: RePEc:eee:pubeco:v:87:y:2003:i:9-10:p:2369-2396

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Web page: http://www.elsevier.com/locate/inca/505578

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Find related papers by JEL classification:

• D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
• D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
• D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
• D8 - Microeconomics - - Information, Knowledge, and Uncertainty
• H1 - Public Economics - - Structure and Scope of Government

References

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1. Nalebuff, Barry J & Stiglitz, Joseph E, 1983. "Information, Competition, and Markets," American Economic Review, American Economic Association, vol. 73(2), pages 278-83, May.
2. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn.
3. Hermalin, Benjamin E., 1991. "The Effects of Competition on Executive Behavior," Department of Economics, Working Paper Series qt7m13v5dd, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
   
   • Benjamin E. Hermalin, 1992. "The Effects of Competition on Executive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 350-365, Autumn.
   • Benjamin E. Hermalin., 1991. "The Effects of Competition on Executive Behavior," Economics Working Papers 91-182, University of California at Berkeley.
4. Schmidt, Klaus M., 1996. "Managerial Incentives and Product Market Competition," CEPR Discussion Papers 1382, C.E.P.R. Discussion Papers.
   
   • Schmidt, Klaus M, 1997. "Managerial Incentives and Product Market Competition," Review of Economic Studies, Wiley Blackwell, vol. 64(2), pages 191-213, April.
5. Auriol, Emmanuelle & Laffont, Jean-Jacques, 1992. "Regulation by Duopoly," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(3), pages 507-33, Fall.
   
   • Auriol, Emmanuelle & Laffont, Jean-Jacques, 1992. "Regulation by Duopoly," IDEI Working Papers 20, Institut d'Économie Industrielle (IDEI), Toulouse.
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   • Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-37, October.
7. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-23, October.
8. Riordan, Michael H. & Sappington, David E. M., 1988. "Optimal contracts with public ex post information," Journal of Economic Theory, Elsevier, vol. 45(1), pages 189-199, June.
9. Hermalin, Benjamin E., 1992. "Heterogeneity in Organizational Form: Why Otherwise Identical Firms Choose Different Incentives for Their Managers," Department of Economics, Working Paper Series qt4v4548gz, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
   
   • Benjamin E. Hermalin, 1994. "Heterogeneity in Organizational Form: Why Otherwise Identical Firms Choose Different Incentives for Their Managers," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 518-537, Winter.
   • Benjamin E. Hermalin., 1992. "Heterogeneity in Organizational Form: Why Otherwise Identical Firms Choose Different Incentives for Their Managers," Economics Working Papers 92-193, University of California at Berkeley.
10. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
11. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
12. James J. Anton & Dennis A. Yao, 1989. "Split Awards, Procurement, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 538-552, Winter.
13. Anton, James J & Yao, Dennis A, 1992. "Coordination in Split Award Auctions," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 681-707, May.
14. Dana, James Jr. & Spier, Kathryn E., 1994. "Designing a private industry : Government auctions with endogenous market structure," Journal of Public Economics, Elsevier, vol. 53(1), pages 127-147, January.
15. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.

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Citations

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Cited by:

1. Guerriero, Carmine, 2011. "Accountability in government and regulatory policies: Theory and evidence," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 453-469.
2. Erdogdu, Erkan, 2005. "Energy market reforms in Turkey: An economic analysis," MPRA Paper 26929, University Library of Munich, Germany.
   
   • Erdogdu, Erkan, 2007. "Regulatory Reform in Turkish Energy Industry: An analysis," MPRA Paper 19100, University Library of Munich, Germany.
3. Mikhail Drugov, 2010. "Information and delay in an agency model," RAND Journal of Economics, RAND Corporation, vol. 41(3), pages 598-615.
4. Josse Delfgaauw & Robert Dur, 2004. "Incentives and Workers’ Motivation in the Public Sector," CESifo Working Paper Series 1223, CESifo Group Munich.
   
   • Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, 01.
   • Josse Delfgaauw & Robert Dur, 2004. "Incentives and Workers' Motivation in the Public Sector," Tinbergen Institute Discussion Papers 04-060/1, Tinbergen Institute.
5. Agrell, Per Joakim, 2010. "Calling the Cards: Fears, Threats and Delegation in Infrastructure Regulation Games," Open Access publications from Université catholique de Louvain info:hdl:2078/70413, Université catholique de Louvain.
6. Piccolo, Salvatore & D'Amato, Marcello & Martina, Riccardo, 2008. "Product market competition and organizational slack under profit-target contracts," International Journal of Industrial Organization, Elsevier, vol. 26(6), pages 1389-1406, November.

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