Price Caps and Price Floors: Entry Liberalization and the Stranded Asset Issue

Bruno Jullien and Kai-Uwe Kuhn ()

Working Papers from Toulouse - GREMAQ

Abstract: We show that a regulator can use diffuse information held by potential entrants in the market as a powerful incentive instrument even when neither government tranfers to firms nor the regulation of entrants is permitted. Optimal regulation involves a menu of price caps and price floors. The latter prevent the incumbent form competing too harshly when entry occurs inducing implicit financial punishments.

Keywords: PRICES; REGULATION; ACCESS TO MARKETS (search for similar items in EconPapers)
JEL-codes: D49 (search for similar items in EconPapers)
Pages: 30 pages
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:fth:gremaq:98.492

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