Yardstick Competition to Elicit Private Information: An Empirical Analysis of the Japanese Gas Distribution Industry

Ayako Suzuki

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: This study examines the effect of yardstick regulation in Japan's gas distribution sector, especially focusing on its effect of reducing the adverse selection problem. The Japanese government has regulated the price of city gas supplies by a combination of fixed-price regulation and ex-ante yardstick regulation. The yardstick compares a firm's reported costs wit those of "similar" firms before the price is determined.Realizing that yardstick inspection will lead the industry to a full-information outcome if it works perfectly, we infer its effect from the difference between the current and the counterfactual full-information welfare levels.

Date: 2008-03
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0709

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