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Competition policy, regulation and the institutional design of industry supervision

Author

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  • Cécile Aubert
  • Jérôme Pouyet

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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Suggested Citation

  • Cécile Aubert & Jérôme Pouyet, 2004. "Competition policy, regulation and the institutional design of industry supervision," Recherches économiques de Louvain, De Boeck Université, vol. 70(2), pages 153-168.
    • Handle: RePEc:cai:reldbu:rel_702_0153
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    References listed on IDEAS

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    11. POUYET, Jerôme & VEROUDEN, Vincent, 2002. "Antitrust enforcement policy and markets interaction: targeted or concerted interventions ?," LIDAM Discussion Papers CORE 2002028, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Pedro P. Barros & Steffen Hoernig & Tore Nilssen, 2015. "Transversal Agency and Crowding Out," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 171(4), pages 589-608, December.
    2. Cosnita-Langlais, Andreea & Tropeano, Jean-Philippe, 2013. "Fight cartels or control mergers? On the optimal allocation of enforcement efforts within competition policy," International Review of Law and Economics, Elsevier, vol. 34(C), pages 34-40.
    3. 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.
    4. Maia David, 2007. "Politique environnementale et politique de la concurrence," Economie & Prévision, La Documentation Française, vol. 0(2), pages 125-138.

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    More about this item

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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