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Regulation of a Complementary Imputed Good in a Competitive Environment

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  • Leopold Soegner

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    (Department of Economics, Vienna University of Economics & B.A.)

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    Abstract

    This article investigates the problem of a regulated imputed good which is used in the production process of the final goods. The relationship between the firm producing the essential input factor and the regulating authority is described by a standard principal-agent setup. By assuming a fixed functional relationship in the production process between the imputed good and the final market goods, there exists some kind of separation between regulation and competition on the final good market. Thus, the degree of competitiveness on the final good market has no effect on optimal contracts. Moreover, in this model vertical integration weakly dominates vertical disintegration in welfare for subadditive cost functions.

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    Bibliographic Info

    Paper provided by Vienna University of Economics, Department of Economics in its series Department of Economics Working Papers with number wuwp056.

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    Date of creation: Mar 1998
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    Handle: RePEc:wiw:wiwwuw:wuwp056

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    Postal: Welthandelsplatz 1, 1020 Vienna, Austria
    Web page: http://www.wu.ac.at/economics/en

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    References

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    1. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
    3. Owen R. Phillips & Charles F. Mason, 1996. "Market Regulation and Multimarket Rivalry," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 596-617, Autumn.
    4. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-41, June.
    5. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
    6. David E.M. Sappington & David S. Sibley, 1992. "Strategic Nonlinear Pricing under Price-Cap Regulation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 1-19, Spring.
    7. McAfee, R Preston & McMillan, John, 1995. "Organizational Diseconomies of Scale," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 399-426, Fall.
    8. 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.
    9. Laffont, Jean-Jacques, 1994. "The New Economics of Regulation Ten Years After," Econometrica, Econometric Society, vol. 62(3), pages 507-37, May.
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    Cited by:
    1. Özlem Onaran, 2007. "International financial markets and fragility in the Eastern Europe: "can it happen" here?," Department of Economics Working Papers wuwp108, Vienna University of Economics, Department of Economics.
    2. Gerlinde Fellner & Matthias Sutter, 2008. "Causes, consequences, and cures of myopic loss aversion - An experimental investigation," Jena Economic Research Papers 2008-004, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
    3. Theresa Grafeneder-Weissteiner & Klaus Prettner, 2009. "Agglomeration and population ageing in a two region model of exogenous growth," Working Papers 0901, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
    4. Aleksandra Riedl & Silvia Rocha-Akis, 2008. "Testing the tax competition theory: How elastic are national tax bases in Western Europe?," Working Papers 142, Oesterreichische Nationalbank (Austrian Central Bank).
    5. Engelbert Stockhammer & Paul Ramskogler, 2008. "Post Keynesian economics - how to move forward," Department of Economics Working Papers wuwp124, Vienna University of Economics, Department of Economics.
    6. Theresa Grafeneder-Weissteiner, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Papers wuwp132, Vienna University of Economics, Department of Economics.
    7. Engelbert Stockhammer & Paul Ramskogler, 2007. "Uncertainty and exploitation in history," Department of Economics Working Papers wuwp104, Vienna University of Economics, Department of Economics.
    8. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2007. "Footloose capital and productive public services," Department of Economics Working Papers wuwp111, Vienna University of Economics, Department of Economics.
    9. Annemarie Steidl & Engelbert Stockhammer, 2007. "Coming and leaving. Internal mobility in late Imperial Austria," Department of Economics Working Papers wuwp107, Vienna University of Economics, Department of Economics.

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