Incomplete Regulation, Competition and Entry in Increasing Returns to Scale Industries
AbstractThe paper analyzes the effects of liberalization in increasing returns to scale industries. It studies the optimal regulation of an incumbent competing with an unregulated strategic competitor, when public funds are costly. The model shows a trade off between productive and allocative efficiency. Moreover, the welfare gains of liberalization, as compared with regulated monopoly, are a non monotonic function of the cost of public funds. Finally, in the case of severe cash constraint of the government, incomplete regulation may also dominate full regulation of duopoly.
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Bibliographic InfoPaper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2009-08.
Date of creation: 2009
Date of revision:
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Incomplete Regulation; Asymmetric Information; Incentives; Cost of Public Funds.;
Other versions of this item:
- Sara Biancini, 2010. "Incomplete Regulation, Competition, and Entry in Increasing Returns to Scale Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 12(6), pages 1003-1026, December.
- L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-10 (All new papers)
- NEP-COM-2010-01-10 (Industrial Competition)
- NEP-CTA-2010-01-10 (Contract Theory & Applications)
- NEP-MIC-2010-01-10 (Microeconomics)
- NEP-REG-2010-01-10 (Regulation)
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