Resource title

A Modified Yardstick Competition Mechanism

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Resource description

This paper analyzes a modified yardstick competition mechanism (MYC), where the yardstick employed consists of a tariff basket and total costs. This mechanism has a significant information advantage: the regulator ?only? needs to observe total costs and output of all firms. The modified yardstick competition mechanism can ensure a socially optimal outcome when allowing for spatial and second degree price discrimination, without increasing the informational requirements. We also introduce regulatory lags in the model. A systematic comparison between the results of traditional yardstick regulation and modified yardstick regulation is carried out. Finally, we discuss the applicability of the mechanism.

Resource author

Georg Meran, Christian R. von Hirschhausen

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/18452

Resource license

Adapt according to the presented license agreement and reference the original author.