Dynamic Regulation with Technological Progress
This paper develops a dynamic regulatory model wherein the regulator can introduce an entrant into a market characterised by asymmetric information about cost and the outcome of the technological progress. Whe there is passive entry, it is found that the optimal contract has a kink, i.e. it is no longer fully separating, but has a pooling interval. In such a case, the social welfare increases as entry deterrence effect countervails the traditional incentive of the firms to misrepresent their true cost.
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|Date of creation:||1996|
|Date of revision:|
|Contact details of provider:|| Postal: INDIRA GANDHI; INDIRA GANDHI INSTITUTE OF DEVELOPMENT RESEARCH, GEN.VAIDYA MARG.GOREGAON (E) BOMBAY-400 065 INDIA.|
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