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Regulating Oligopolistic Industries: A Generalized Incentive Scheme

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  • Schwermer, Sylvia

Abstract

This paper deals with the design of regulatory mechanisms for oligopolistic industries. The proposed incentive scheme consists of two parts: a subsidy depending upon a firm's contribution to an equilibrium price reduction, and a tax equal to the profit of the previous period. This mechanism is as effective in regulating oligopolies as the well-known incremental surplus subsidy scheme in a monopoly framework. The proposed scheme provides appropriate incentives to enforce competitive behavior in a Cournot oligopoly. The scheme is welfare improving even if firms collude. Copyright 1994 by Kluwer Academic Publishers

Suggested Citation

  • Schwermer, Sylvia, 1994. "Regulating Oligopolistic Industries: A Generalized Incentive Scheme," Journal of Regulatory Economics, Springer, vol. 6(1), pages 97-108, February.
    • Handle: RePEc:kap:regeco:v:6:y:1994:i:1:p:97-108
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    Cited by:

    1. Prieger, James E. & Sanders, Nicholas J., 2012. "Verifiable and non-verifiable anonymous mechanisms for regulating a polluting monopolist," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 410-426.
    2. Lantz, Bjorn, 2007. "A non-Bayesian piecewise linear approximation adjustment process for incentive regulation," Information Economics and Policy, Elsevier, vol. 19(1), pages 95-101, March.
    3. Hassan Benchekroun & Ngo Van Long, 2008. "A Class Of Performance‐Based Subsidy Rules," The Japanese Economic Review, Japanese Economic Association, vol. 59(4), pages 381-400, December.
    4. Marcos, Félix, 2011. "Price regulation in oligopolistic markets," UC3M Working papers. Economics 13443, Universidad Carlos III de Madrid. Departamento de Economía.
    5. Marcos, Félix, 2010. "Price regulation in oligopoly," UC3M Working papers. Economics we100101, Universidad Carlos III de Madrid. Departamento de Economía.
    6. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.

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