Incomplete regulation, market competition and collusion
AbstractRegulators often do not regulate all firms competing in a given sector. Due to productsubstitutability, unregulated competitors have incentives to bribe regulated firms to have themoverstate their costs and produce less. The best collusion-proof contract entails distortions bothfor inefficient and efficient regulated firms (distortion âat the topâ). But a contract inducingactive collusion may do better by allowing the regulator to âteam upâ with the regulated firmto indirectly tax its competitor. The best such contract is characterized. It is such that theunregulated firm pays the regulated one to have it truthfully reveals its inefficiency.
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Bibliographic InfoArticle provided by Springer in its journal Review of Economic Design.
Volume (Year): 10 (2006)
Issue (Month): 2 (August)
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Web page: http://link.springer.de/link/service/journals/10058/index.htm
Other versions of this item:
- Cécile Aubert & Jerôme Pouyet, 2004. "Incomplete Regulation, Market Competition and Collusion," Working Papers 2004-39, Centre de Recherche en Economie et Statistique.
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
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