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http://hdl.handle.net/10419/18452
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| Title: | | A Modified Yardstick Competition Mechanism  |
| Authors: | | Meran, Georg von Hirschhausen, Christian R. |
| Issue Date: | | 2006 |
| Series/Report no.: | | DIW-Diskussionspapiere 559 |
| Abstract: | | This paper analyzes a modified yardstick competition mechanism (MYC), where the yardstick employed consists of a tariff basket and total costs. This mechanism has a significant information advantage: the regulator ?only? needs to observe total costs and output of all firms. The modified yardstick competition mechanism can ensure a socially optimal outcome when allowing for spatial and second degree price discrimination, without increasing the informational requirements. We also introduce regulatory lags in the model. A systematic comparison between the results of traditional yardstick regulation and modified yardstick regulation is carried out. Finally, we discuss the applicability of the mechanism. |
| Subjects: | | regulation yardstick competition mechanism design information asymmetry |
| JEL: | | L11 L51 D40 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des DIW DIW-Diskussionspapiere
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