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Competition policy, regulation and the institutional design of industry supervision

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Author Info
CŽcile AUBERT (GREMAQ)
JŽr™me POUYET (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))

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Abstract

We study the welfare impact of enforcing a competitive behavior from an unregulated fringe competing with a regulated dominant operator with imperfectly differentiated goods. The fringe is potentially collusive but may be supervised by a competition authority. We show that the complementarity/substitutability between regulation and competition policy strongly depends on the nature of the market interaction. Forcing the fringe to adopt a competitive behavior always benefits consumers. However, it also affects the amount of subsidy that must be provided to the regulated firm for cost-reimbursement purposes, which has a social cost when public funds are costly. With complements, antitrust intervention is always welfare-improving. It is also preferable with weak substitutes but is detrimental to welfare for strong substitutes.

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Publisher Info
Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (REL - Recherches Economiques de Louvain) with number 2004022.

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Length: 16
Date of creation: 01 Jun 2004
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Handle: RePEc:ctl:louvre:2004022

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Related research
Keywords: Regulation; Competition policy;

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Find related papers by JEL classification:
L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

References listed on IDEAS
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  1. Jean-Jacques Laffont & David Martimort, 1999. "Separation of Regulators Against Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 232-262, Summer. [Downloadable!] (restricted)
    Other versions:
  2. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January. [Downloadable!] (restricted)
    Other versions:
  3. Spulber, Daniel F & Besanko, David, 1992. "Delegation, Commitment, and the Regulatory Mandate," Journal of Law, Economics and Organization, Oxford University Press, vol. 8(1), pages 126-54, March.
  4. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-38, March. [Downloadable!] (restricted)
  5. Brainard, S. Lael & Martimort, David, 1997. "Strategic trade policy with incompletely informed policymakers," Journal of International Economics, Elsevier, vol. 42(1-2), pages 33-65, February. [Downloadable!] (restricted)
  6. POUYET, Jer™me & VEROUDEN, Vincent, 2002. "Antitrust enforcement policy and markets interaction: targeted or concerted interventions ?," CORE Discussion Papers 2002028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
  7. Brainard, S Lael & Martimort, David, 1996. "Strategic Trade Policy Design with Asymmetric Information and Public Contracts," Review of Economic Studies, Blackwell Publishing, vol. 63(1), pages 81-105, January. [Downloadable!] (restricted)
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