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 ‘at the top’). But a contract inducingactive collusion may do better by allowing the regulator to ‘team up’ 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 InfoPaper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2004-39.
Date of creation: 2004
Date of revision:
Other versions of this item:
- Cécile Aubert & Jérôme Pouyet, 2006. "Incomplete regulation, market competition and collusion," Review of Economic Design, Springer, vol. 10(2), pages 113-142, August.
- 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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