Dynamic Regulation with Technological Progress

N. Das

Working Papers from Indira Gandhi Institute of Development Research-

Abstract: 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.

Keywords: REGULATION; TECHNOLOGICAL CHANGE; ASYMETRIC INFORMATION (search for similar items in EconPapers)
JEL-codes: D82 O31 O32 (search for similar items in EconPapers)
Pages: 26 pages
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:fth:indgan:135

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