Entry Regulation, Fixed Costs and Dominant Public Firms
A crucial aspect of regulating an oligopoly characterized by the presence of fixed costs in the determination of the correct number of firms in the industry. This paper examines direct price and entry regulation and the indirect regulation through public ownership of a single firm which competes directly with private firms. A basic conclusion of the paper is that provided potential entrants are "rational" price regulation or regulation via a dominant public firm are sufficient policy instruments to attain first and second best welfare optima.
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