Investment Incentives of a Regulated Dominant Firm
AbstractWe study the investment incentives of a regulated, incumbent firm in a deregulation process. The regulator cannot commit to a long-term regulatory policy, and investment decisions are taken before optimal regulatory policies are imposed. We characterize the regulated incumbent's incentive to invest when a deregulation process is initiated and an unregulated firm enters the market as a result. The change in the marginal return to investment depends on how the investment changes the firm's virtual cost--the sum of its physical production and information costs. When the marginal return to investment increases due to deregulation, social welfare increases as a result of higher investment and more competition. Otherwise, the change in social welfare depends on the total of the effects in the fall of investment and increased competition. We also present conditions under which deregulation enhances welfare. Copyright 1999 by Kluwer Academic Publishers
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 16 (1999)
Issue (Month): 3 (November)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100298
Other versions of this item:
- Gary Biglaiser & Ching-to Albert Ma, 1996. "Investment Incentives of a Regulated Dominant Firm," Papers 0067, Boston University - Industry Studies Programme.
- Biglaiser, G. & Ma, C.A., 1996. "Investment Incentives of a Regulated Dominant Firm," Papers 67, Boston University - Industry Studies Programme.
- Biglaiser, G. & Ma, C.T.A., 1996. "Investment Incentives of a Regulated Dominant Firm," UFAE and IAE Working Papers 340.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- K20 - Law and Economics - - Regulation and Business Law - - - General
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Debande, Olivier, 2001. "Deregulating and privatizing statutory monopolies," Journal of Economics and Business, Elsevier, vol. 53(2-3), pages 111-137.
- Ma, Ching-to Albert, 2004. "Public rationing and private cost incentives," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 333-352, January.
- Vareda, João, 2007.
"Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction,"
FEUNL Working Paper Series
wp526, Universidade Nova de Lisboa, Faculdade de Economia.
- João Vareda, 2007. "Unbundling and Incumbent Investment in Quality Upgrades and Cost Reduction," Working Papers 31, Portuguese Competition Authority.
- repec:mop:credwp:05.07.59 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.