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A Reexamination of Yardstick Competition
Author(s) -
Sobel Joel
Publication year - 1999
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1430-9134.1999.00033.x
Subject(s) - yardstick , regulator , competition (biology) , investment (military) , limit (mathematics) , simple (philosophy) , microeconomics , economics , distribution (mathematics) , mathematics , political science , biology , law , ecology , mathematical analysis , biochemistry , philosophy , geometry , epistemology , politics , gene
This paper shows that yardstick competition does not assist a regulator when lump‐sum transfers are not costly and the regulator does not care about the distribution of income. Yardstick competition may discourage investment that would make efficient operation possible. The paper characterizes optimal regulatory schemes in a simple model and demonstrates that it may be optimal to limit the amount of information available to the regulator.