Self-regulation under asymmetric cost information

Ismail Saglam

Economia e Politica Industriale: Journal of Industrial and Business Economics, 2022, vol. 49, issue 2, No 6, 335-368

Abstract: Abstract In this paper, we study how a monopolistic firm with unknown costs may behave under the threat of regulation. To this aim, we integrate the self-regulation model of Glazer and McMillan (Q J Econ 107(3):1089–1099, 1992) with the optimal regulatory mechanism devised by Baron and Myerson (Econometrica 50(4):911–930, 1982) for the case of asymmetric information. Simulating the equilibrium outcome of our integrated model for a wide range of parameter values, we show among many results that the firm threatened with regulation always constrains its price; moreover, the price the firm charges under the threat of regulation can be even lower than the price it has to charge when it is regulated.

Keywords: Monopoly; Regulation; Self-regulation; Asymmetric information (search for similar items in EconPapers)
JEL-codes: D42 D82 L51 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Working Paper: Self-Regulation Under Asymmetric Cost Information (2018)
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DOI: 10.1007/s40812-021-00191-0

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