On the dynamic optimality of yardstick regulation

Michele Bisceglia, Roberto Cellini and Luca Grilli
Additional contact information
Michele Bisceglia: Toulouse School of Economics

Annals of Operations Research, 2022, vol. 315, issue 1, No 4, 73-92

Abstract: Abstract This paper proposes a generalization of Shleifer’s (RAND J Econ 16:319–327, 1985) model of yardstick competition to a dynamic framework. In a differential game setting, we show that the yardstick mechanism effectively replicates the first-best solution if players adopt open-loop behaviour rules and are symmetric at the initial time; in the absence of initial symmetry, the social efficiency is reached only in the asymptotic steady state. On the contrary, if players adopt Markovian behaviour rules, then the yardstick pricing rule cannot achieve the first-best solution along the equilibrium path of any Markov Perfect Nash Equilibrium.

Keywords: Yardstick competition; Dynamic price regulation; Differential games; 91A23; 49N90; 91A80; 91B55; 91A12. (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s10479-022-04671-x Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: On the dynamic optimality of yardstick regulation (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:annopr:v:315:y:2022:i:1:d:10.1007_s10479-022-04671-x

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10479

DOI: 10.1007/s10479-022-04671-x

Access Statistics for this article

Annals of Operations Research is currently edited by Endre Boros

More articles in Annals of Operations Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().