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Does Incentive Compatible Mechanism Design Induce Competitive Entry?

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  • Sumit K. Majumdar

Abstract

This article evaluates the impact of the introduction of incentive regulation on competitive entry in the territories of the firms making up the population of local exchange carriers in the United States between 1988 and 2001. The results show that the rate of return method and other intermediate incentive schemes have had a negative impact on competitive entry. Conversely, the introduction of pure price caps schemes had a positive and significant impact on competitive entry in incumbent telecommunications firms' markets. These results highlight the importance of proper and appropriate incentive compatible mechanism design in altering the playing field so that competitive entry can occur.

Suggested Citation

  • Sumit K. Majumdar, 2011. "Does Incentive Compatible Mechanism Design Induce Competitive Entry?," Journal of Competition Law and Economics, Oxford University Press, vol. 7(2), pages 427-453.
    • Handle: RePEc:oup:jcomle:v:7:y:2011:i:2:p:427-453.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhq028
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    Cited by:

    1. Majumdar, Sumit K., 2015. "Competitor entry impact on jobs and wages in incumbent firms: retrospective evidence from a natural experiment," Business and Politics, Cambridge University Press, vol. 17(2), pages 291-326, August.
    2. Sumit K. Majumdar & Rabih Moussawi & Ulku Yaylacicegi, 2014. "Do Incumbents’ Mergers Influence Entrepreneurial Entry? An Evaluation," Entrepreneurship Theory and Practice, , vol. 38(3), pages 601-633, May.
    3. Majumdar, Sumit K., 2016. "Debt and communications technology diffusion: Retrospective evidence," Research Policy, Elsevier, vol. 45(2), pages 458-474.

    More about this item

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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