Yardstick Competition to Elicit Private Information: An Empirical Analysis

Ayako Suzuki

doi:10.1007/s11151-011-9332-6

Yardstick Competition to Elicit Private Information: An Empirical Analysis

Ayako Suzuki

School of International Liberal Studies

Research output: Contribution to journal › Article › peer-review

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 language	English
Pages (from-to)	313-338
Number of pages	26
Journal	Review of Industrial Organization
Volume	40
Issue number	4
DOIs	https://doi.org/10.1007/s11151-011-9332-6
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

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AB - 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.

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Yardstick Competition to Elicit Private Information: An Empirical Analysis

Abstract

Keywords

ASJC Scopus subject areas

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