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The Timing of Product Innovation and Regulatory Delay

  • James E. Prieger

    (Department of Economics, University of California Davis)

This paper endogenizes the interplay between innovation by a regulated â?¦rm and regulatory delay. In the signaling model, the â?¦rm times its innovation to communicate its private information about the MC of delay to the regulator. When product innovation costs fall over time, an extra day of regulatory delay increases time to introduction by more than a day. Successful signaling leads the regulator to adjust regulatory delay. The separating equilibrium of the signaling model generates testable predictions for how innovation and regulatory delay evolve over time. The model is consistent with data gathered from one of the Bell telecommunications â?¦rms.

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Paper provided by University of California, Davis, Department of Economics in its series Working Papers with number 19.

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Length: 38
Date of creation: 16 Jan 2003
Date of revision:
Handle: RePEc:cda:wpaper:01-9
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  1. Cho, In-Koo & Kreps, David M, 1987. "Signaling Games and Stable Equilibria," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 179-221, May.
  2. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-33, March.
  3. Wolak, Frank A, 1991. "The Local Nature of Hypothesis Tests Involving Inequality Constraints in Nonlinear Models," Econometrica, Econometric Society, vol. 59(4), pages 981-95, July.
  4. James E. Prieger, 2003. "Regulation, Innovation, and the introduction of new telecommunications services," Working Papers 08, University of California, Davis, Department of Economics.
  5. Roycroft, Trevor R., 1999. "Alternative regulation and the efficiency of local exchange carriers: evidence from the Ameritech states," Telecommunications Policy, Elsevier, vol. 23(6), pages 469-480, September.
  6. Lyon, Thomas P & Huang, Haizou, 1995. "Asymmetric Regulation and Incentives for Innovation," Industrial and Corporate Change, Oxford University Press, vol. 4(4), pages 769-76.
  7. Cabral, Luis M B & Riordan, Michael H, 1989. "Incentives for Cost Reduction under Price Cap Regulation," Journal of Regulatory Economics, Springer, vol. 1(2), pages 93-102, June.
  8. Yossef Spiegel & Daniel F. Spulber, 1997. "Capital Structure with Countervailing Incentives," RAND Journal of Economics, The RAND Corporation, vol. 28(1), pages 1-24, Spring.
  9. Prager, Robin A, 1989. "The Effects of Regulatory Policies on the Cost of Debt for Electric Utilities: An Empirical Investigation," The Journal of Business, University of Chicago Press, vol. 62(1), pages 33-53, January.
  10. Donald, Stephen G & Sappington, David E M, 1997. "Choosing among Regulatory Options in the United States Telecommunications Industry," Journal of Regulatory Economics, Springer, vol. 12(3), pages 227-43, November.
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