Monopole ou duopole: l'effet de comparaison

Emmanuelle Auriol

Annals of Economics and Statistics, 1993, issue 31, 1-31

Abstract: This paper analyses, within a static model, the trade-off between economies of scale and informational cost of regulating a monopoly. Within the framework of the new regulatory economics, which emphasizes asymmetries of information, we weigh the informational advantage of duopolistic structures against the duplication of fixed costs. The duopoly structure provides better control of information rents because of the correlation of the firms' private information, making possible some form of yardstick competition. Since costs are correlated, revelation requires less distortion as cost reports may be compared across firms. With a duopoly structure the information rents are lowered and the production levels are closer to the first-best. Because the duopoly provides a larger sample of producers, it reduces expected production costs as the lowest of two possible costs is used for final production. The duplication of fixed costs may be socially valuable for two different reasons: (1) the sampling effect, and (2) the yardstick effect. The optimal market structure (monopoly or duopoly) results from a trade-off between fixed costs and informational costs. We also study how asymmetric information affects the choice between two producers when the (ex ante) optimal market structure is a duopoly (since the variable costs are linear there is no gain after the revelation stage to keep up two producers, only one firm is involved in production at the optimum). Because of yardstick competition, an efficient producer will never mimic an inefficient one. So with a duopolistic structure the rents of efficient firms are curtailed. As a consequence, it is less worthwhile to distort production of inefficient firms. This quantity gain favors high cost producers: it is not always the most efficient firm that produces at the optimum. The optimal choice of the producer is the result of a trade-off between variable costs and information costs.

Date: 1993
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