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Regulating oligopolistic competition

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  • Yang, Kai Hao
  • Zentefis, Alexander K.

Abstract

We consider the problem of how to regulate an oligopoly when firms have private information about their costs. In the environment, consumers make discrete choices over goods, and minimal structure is placed on the manner in which firms compete. In the optimal regulatory policy, firms compete on price margins, and based on firms' prices, the regulator charges them taxes or give them subsidies, and imposes on each firm a “yardstick” price cap that depends on the posted prices of competing firms.

Suggested Citation

  • Yang, Kai Hao & Zentefis, Alexander K., 2023. "Regulating oligopolistic competition," Journal of Economic Theory, Elsevier, vol. 212(C).
    • Handle: RePEc:eee:jetheo:v:212:y:2023:i:c:s0022053123001059
    DOI: 10.1016/j.jet.2023.105709
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    References listed on IDEAS

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    More about this item

    Keywords

    Regulation; Price caps; Mechanism design;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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