A Modified Yardstick Competition Mechanism

Georg Meran and Christian Hirschhausen

No 559, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper analyzes a modified yardstick competition mechanism (MYC), where the yardstick employed consists of a tariff basket and total costs. This mechanism has a significant information advantage: the regulator "only" needs to observe total costs and output of all firms. The modified yardstick competition mechanism can ensure a socially optimal outcome when allowing for spatial and second degree price discrimination, without increasing the informational requirements. We also introduce regulatory lags in the model. A systematic comparison between the results of traditional yardstick regulation and modified yardstick regulation is carried out. Finally, we discuss the applicability of the mechanism.

Keywords: Regulation; Yardstick competition; Mechanism design; Information asymmetry (search for similar items in EconPapers)
JEL-codes: D40 L11 L51 (search for similar items in EconPapers)
Pages: 29 p.
Date: 2006
New Economics Papers: this item is included in nep-com
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.diw.de/documents/publikationen/73/diw_01.c.44084.de/dp559.pdf (application/pdf)

Related works:
Journal Article: A modified yardstick competition mechanism (2009)
Working Paper: A Modified Yardstick Competition Mechanism (2006)
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:diw:diwwpp:dp559

Access Statistics for this paper

More papers in Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by Bibliothek ().