A modified yardstick competition mechanism
AbstractThis paper analyzes a modified yardstick competition mechanism (MYC), where the yardstick employed consists of a tariff basket and total costs. This mechanism has a significant information advantage: the regulator âonlyâ needs to observe total costs and output of all firms. The modified yardstick competition mech- anism can ensure a socially optimal outcome when allowing for spatial and second degree price discrimination, without increas- ing the informational requirements. We also introduce regulatory lags in the model. A systematic comparison between the results of traditional yardstick regulation and modified yardstick regu- lation is carried out. Finally, we discuss the applicability of the mechanism.
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): 35 (2009)
Issue (Month): 3 (June)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100298
Regulation; Yardstick competition; Mechanism design; Information asymmetry; Heterogeneity; L51; L11; D40;
Other versions of this item:
- Georg Meran & Christian von Hirschhausen, 2006. "A Modified Yardstick Competition Mechanism," Discussion Papers of DIW Berlin 559, DIW Berlin, German Institute for Economic Research.
- Georg Meran & Christian von Hirschhausen, 2006. "A Modified Yardstick Competition Mechanism," Working Papers 2006-05, Center for Network Industries and Infrastructure (CNI).
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- D40 - Microeconomics - - Market Structure and Pricing - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tangeras, Thomas P., 2002.
"Collusion-proof yardstick competition,"
Journal of Public Economics,
Elsevier, vol. 83(2), pages 231-254, February.
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Reinhard Selten, 1974. "Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games," Working Papers 023, Bielefeld University, Center for Mathematical Economics.
- Joel Sobel, 1999. "A Reexamination of Yardstick Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(1), pages 33-60, 03.
- Potters, J.J.M. & Rockenbach, B. & Sadrieh, A. & Damme, E.E.C. van, 2003.
"Collusion under Yardstick Competition: An Experimental Study,"
2003-97, Tilburg University, Center for Economic Research.
- 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.
- Potters, J.J.M. & Rockenbach, B. & Sadrieh, A. & Damme, E.E.C. van, 2004. "Collusion under yardstick competition: An experimental study," Open Access publications from Tilburg University urn:nbn:nl:ui:12-141666, Tilburg University.
- Damme, E.E.C. van & Potters, J.J.M. & Rockenbach, B. & Sadrieh, A., 2003. "Collusion under Yardstick Competition: An Experimental Study," Discussion Paper 2003-009, Tilburg University, Tilburg Law and Economic Center.
- Greene, William, 2005. "Reconsidering heterogeneity in panel data estimators of the stochastic frontier model," Journal of Econometrics, Elsevier, vol. 126(2), pages 269-303, June.
- Amrstong, Mark & Cowan, Simon & Vickers, John, 1995.
"Nonlinear pricing and price cap regulation,"
Journal of Public Economics,
Elsevier, vol. 58(1), pages 33-55, September.
- Vogelsang, Ingo, 1988. "A Little Paradox in the Design of Regulatory Mechanisms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 467-76, August.
- Spence, Michael, 1977. "Nonlinear prices and welfare," Journal of Public Economics, Elsevier, vol. 8(1), pages 1-18, August.
- Sappington, David E M & Sibley, David S, 1988. "Regulating without Cost Information: The Incremental Surplus Subsidy Scheme," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(2), pages 297-306, May.
- Dag Morten Dalen, 1998. "Yardstick Competition and Investment Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 105-126, 03.
- Goldman, M Barry & Leland, Hayne E & Sibley, David S, 1984. "Optimal Nonuniform Prices," Review of Economic Studies, Wiley Blackwell, vol. 51(2), pages 305-19, April.
- Chakravorty Ujjayant & Hochman Eithan & Zilberman David, 1995. "A Spatial Model of Optimal Water Conveyance," Journal of Environmental Economics and Management, Elsevier, vol. 29(1), pages 25-41, July.
- Kevin Currier, 2005. "Strategic Firm Behavior Under Average-Revenue-Lagged Regulation," Journal of Regulatory Economics, Springer, vol. 27(1), pages 67-79, September.
- Finsinger, Jorg & Vogelsang, Ingo, 1981. "Alternative Institutional Frameworks for Price Incentive Mechanism," Kyklos, Wiley Blackwell, vol. 34(3), pages 388-404.
- David Sappington & Dennis Weisman, 2010. "Price cap regulation: what have we learned from 25 years of experience in the telecommunications industry?," Journal of Regulatory Economics, Springer, vol. 38(3), pages 227-257, December.
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.