Yardstick Competition to Elicit Private Information: An Empirical Analysis

Yardstick Competition to Elicit Private Information: An Empirical Analysis The Japanese regulatory authority has introduced a new hybrid regulation that combines a fixed-price contract with ex ante yardstick inspection for local (public utility) gas distribution. The latter compares a firm’s reported costs with those of ‘similar’ firms, and penalizes high-cost firms. We infer the effect of yardstick on information revelation by comparing the actual welfare level with the hypothetical full-information welfare level. Our results suggest that only the very first inspection was effective in reducing firms’ incentive to report higher costs. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Yardstick Competition to Elicit Private Information: An Empirical Analysis

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Publisher
Springer US
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC.
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-011-9332-6
Publisher site
See Article on Publisher Site

Abstract

The Japanese regulatory authority has introduced a new hybrid regulation that combines a fixed-price contract with ex ante yardstick inspection for local (public utility) gas distribution. The latter compares a firm’s reported costs with those of ‘similar’ firms, and penalizes high-cost firms. We infer the effect of yardstick on information revelation by comparing the actual welfare level with the hypothetical full-information welfare level. Our results suggest that only the very first inspection was effective in reducing firms’ incentive to report higher costs.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 4, 2012

References

  • Regulation and measuring cost-efficiency with panel data models: Application to electricity distribution utilities
    Farsi, M.; Filippini, M.

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