Can Poorly Informed Regulators Hinder Competition?

Ana Espinola-Arredondo and Felix Munoz-Garcia

Environmental & Resource Economics, 2015, vol. 61, issue 3, 433-461

Abstract: This paper considers an entry-deterrence game in which environmental policy is set without perfectly observing the incumbent firm’s costs. We investigate if regulators, who can have an informational advantage relative to the potential entrant, support entry-deterring practices. The paper demonstrates that, while entry-deterring equilibria only emerge under restrictive conditions when the regulator is perfectly informed, these equilibria arise under larger settings as he becomes uninformed. Furthermore, we show that the regulator is willing to support the incumbent’s entry-deterring practices regardless of his degree of information if entry costs are sufficiently high. However, when entry costs are lower, the regulator only sustains this type of practices if he is poorly informed. Copyright Springer Science+Business Media Dordrecht 2015

Keywords: Entry deterrence; Signaling; Emission fees; Informational advantage; D82; H23; L12; Q5 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Working Paper: Can Poorly Informed Regulators Hinder Competition? (2013)
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DOI: 10.1007/s10640-014-9801-0

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