A Re-Examination of Yardstick Competition
UCSD Economics Discussion Paper 97-25
19 Pages Posted: 16 Apr 1998
Date Written: October 1997
I observe 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 discourages investment that would make efficient operation possible. I characterize optimal regulatory schemes in a simple model and demonstrate that it is generally optimal to limit the amount of information available to the regulator.
JEL Classification: L51
Suggested Citation: Suggested Citation