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Competition policy, regulation and the institutional design of industry supervision

  • Cécile Aubert
  • Jérôme Pouyet

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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Article provided by De Boeck Université in its journal Recherches économiques de Louvain.

Volume (Year): 70 (2004)
Issue (Month): 2 ()
Pages: 153-168

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Handle: RePEc:cai:reldbu:rel_702_0153
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  1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  2. Brainard, S.L. & Martimort, D., 1992. "Strategic Trade Policy with Incompletely Informed Policymakers," Papers 92.277, Toulouse - GREMAQ.
  3. Federico TRIONFETTI, 1997. "Public Expenditure and Economic Geography," Annales d'Economie et de Statistique, ENSAE, issue 47, pages 101-120.
  4. 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.
  5. 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.
  6. POUYET, Jerôme & 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).
  7. Brainard, S Lael & Martimort, David, 1996. "Strategic Trade Policy Design with Asymmetric Information and Public Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 81-105, January.
  8. Pierre-Philippe COMBES & Bernard CAILLAUD & Bruno JULLIEN, 1997. "Common Market with Regulated Firms," Annales d'Economie et de Statistique, ENSAE, issue 47, pages 65-99.
  9. 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.
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