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Incomplete Regulation, Competition and Entry in Increasing Returns to Scale Industries

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  • Sara BIANCINI

    () (THEMA, Université de Cergy Pontoise)

Abstract

The paper analyzes the effects of liberalization in increasing returns to scale industries. It studies the optimal regulation of an incumbent competing with an unregulated strategic competitor, when public funds are costly. The model shows a trade off between productive and allocative efficiency. Moreover, the welfare gains of liberalization, as compared with regulated monopoly, are a non monotonic function of the cost of public funds. Finally, in the case of severe cash constraint of the government, incomplete regulation may also dominate full regulation of duopoly.

Suggested Citation

  • Sara BIANCINI, 2009. "Incomplete Regulation, Competition and Entry in Increasing Returns to Scale Industries," THEMA Working Papers 2009-08, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2009-08
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    References listed on IDEAS

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    Cited by:

    1. Chi-Chih Lin, 2016. "Can Total Deregulation Be A Better Option Than Partial Deregulation?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(04), pages 1-16, September.

    More about this item

    Keywords

    Incomplete Regulation; Asymmetric Information; Incentives; Cost of Public Funds.;

    JEL classification:

    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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