Citation Success: Regulated Competition under Increasing Returns to Scale
Publikation: Working paper › Forskning
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Citation Success : Regulated Competition under Increasing Returns to Scale. / Greve, Thomas; Keiding, Hans.
Department of Economics, University of Copenhagen, 2011.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Citation Success
T2 - Regulated Competition under Increasing Returns to Scale
AU - Greve, Thomas
AU - Keiding, Hans
N1 - JEL-classifications: L51, L13
PY - 2011
Y1 - 2011
N2 - This paper proposes a mechanism for the regulation of firms in the context of asymmetric information with the aim to induce firms to report its private information truthfully and to save information rents. Baron and Myerson (1982) have considered this problem and derived an optimal policy for regulating a monopolist with unknown costs. They show that it was possible to create a regulatory mechanism that induced the firm to report its private information truthfully. To secure this, a part of the mechanism is to pay the firm a subsidy. This article presents a regulatory mechanism which explores competition in the context of an industry characterized by increasing returns to scale. In contrast to the model in this article, the Baron and Myerson model doesn’t consider increasing returns to scale. In equilibrium each firm chooses to report truthfully without receiving any subsidy. However, the use of competition gives rise to an efficiency lost.
AB - This paper proposes a mechanism for the regulation of firms in the context of asymmetric information with the aim to induce firms to report its private information truthfully and to save information rents. Baron and Myerson (1982) have considered this problem and derived an optimal policy for regulating a monopolist with unknown costs. They show that it was possible to create a regulatory mechanism that induced the firm to report its private information truthfully. To secure this, a part of the mechanism is to pay the firm a subsidy. This article presents a regulatory mechanism which explores competition in the context of an industry characterized by increasing returns to scale. In contrast to the model in this article, the Baron and Myerson model doesn’t consider increasing returns to scale. In equilibrium each firm chooses to report truthfully without receiving any subsidy. However, the use of competition gives rise to an efficiency lost.
M3 - Working paper
BT - Citation Success
PB - Department of Economics, University of Copenhagen
ER -
ID: 32258338