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.
Original language | English |
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Pages (from-to) | 313-338 |
Number of pages | 26 |
Journal | Review of Industrial Organization |
Volume | 40 |
Issue number | 4 |
DOIs | |
Publication status | Published - 2012 Jun |
Keywords
- Hidden information
- Incentive regulation
- Yardstick competition
ASJC Scopus subject areas
- Economics and Econometrics
- Strategy and Management
- Organizational Behavior and Human Resource Management
- Management of Technology and Innovation