Yardstick Competition to Elicit Private Information: An Empirical Analysis

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1 Citation (Scopus)

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 languageEnglish
Pages (from-to)313-338
Number of pages26
JournalReview of Industrial Organization
Volume40
Issue number4
DOIs
Publication statusPublished - 2012 Jun 1

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

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