Regulation, Local Monopolies and Spatial Competition
AbstractMany regulated industries involve an oligopoly market structure. We examine optimal incentive regulation for a duopoly model of spatial competition when firms have private cost information. Market structure is endogenous as regulation determines market segments for firms and output distribution across consumers in each firm's market. By varying the assignment of consumers to firms, a relatively more efficient firm can be rewarded with a larger market, thus reducing quantity incentive distortions. We derive the optimal policy, assess the impact of asymmetric information relative to full information, and examine extensions to allow for ex ante asymmetries in firm structure.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 25 (2004)
Issue (Month): 2 (03)
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Web page: http://www.springerlink.com/link.asp?id=100298
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