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Public Firms as Regulatory Instruments with Cost Uncertainty

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  • Devon Garvie
  • Roger Ware

Abstract

We re-examine the regulatory role of a public firm in an environment of private but correlated information about industry costs. We study three regimes of mixed-market interaction involving both public and private firms: a symmetric Bayesian-Nash equilibrium, an asymmetric Bayesian equilibrium in which the public firm is able to commit to production before the private firms, and a mechanism in which the regulator designs an incentive-compatible schedule for the industry. We find that a public firm plays an important strategic informational role which strengthens its role as a disciplinary regulatory instrument. Further, we find that this strategic informational role is considerably enhanced as we move from indirect regulatory schemes to direct regulation.

Suggested Citation

  • Devon Garvie & Roger Ware, 1996. "Public Firms as Regulatory Instruments with Cost Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 29(2), pages 357-378, May.
  • Handle: RePEc:cje:issued:v:29:y:1996:i:2:p:357-78
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    Citations

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    Cited by:

    1. Benito Arruñada & Luis Vázquez & Giorgio Zanarone, 2009. "Institutional constraints on organizations: the case of Spanish car dealerships," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(1), pages 15-26.
    2. repec:kap:jeczfn:v:120:y:2017:i:3:d:10.1007_s00712-016-0502-8 is not listed on IDEAS
    3. Arturs Kalnins & Francine Lafontaine, 1996. "The Characteristics of Multi-Unit Ownership in Franchising: Evidence from Fast-Food Restaurants in Texas," NBER Working Papers 5859, National Bureau of Economic Research, Inc.
    4. Kazuhiro Ohnishi, 2014. "Sequential Mixed Competition with a Foreign Joint-stock Firm," International Journal of Social Sciences and Management Studies (IJSSMS), The Economics and Social Development Organization (TESDO), vol. 1(2), pages 38-52, June.
    5. Kazuhiro Ohnishi, 2013. "A Two-production-period Model with State-owned and Labour-managed Firms," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 5(1), pages 41-56, April.
    6. Johan Willner, 2006. "A Mixed Oligopoly Where Private Firms Survive Welfare Maximisation," Journal of Industry, Competition and Trade, Springer, vol. 6(3), pages 235-251, December.
    7. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    8. A. Brandão & S. Castro, 2007. "State-owned enterprises as indirect instruments of entry regulation," Journal of Economics, Springer, vol. 92(3), pages 263-274, December.

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