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 ”only” 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.
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Bibliographic InfoPaper provided by Center for Network Industries and Infrastructure (CNI) in its series Working Papers with number 2006-05.
Length: 30 pages
Date of creation: 2006
Date of revision:
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More information through EDIRC
regulation; yardstick competition; mechanism design; information asymmetry;
Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-14 (All new papers)
- NEP-COM-2007-01-14 (Industrial Competition)
- NEP-REG-2007-01-14 (Regulation)
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.:
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