Munich Personal RePEc Archive

On the optimality of the yardstick regulation in the presence of dynamic interaction

Bisceglia, Michele and Cellini, Roberto and Grilli, Luca (2019): On the optimality of the yardstick regulation in the presence of dynamic interaction.

This is the latest version of this item.

[img] PDF
MPRA_paper_94946.pdf

Download (388kB)

Abstract

This paper proposes a generalization of Shleifer's (1985) model of yardstick competition, to a dynamic framework. Specifically, we consider a differential game and we show that the yardstick mechanism is effective to replicate the first-best solution if players adopt open-loop behaviour rules and they are symmetric at the initial time; in the absence of initial symmetry, the social efficiency is reached only in the asymptotic steady state. On the contrary, if players adopt Markovian behaviour rules, then the yardstick pricing rule is not able to achieve the first-best solution along the equilibrium path of any Markov Perfect Nash Equilibrium.

Available Versions of this Item

  • On the optimality of the yardstick regulation in the presence of dynamic interaction. (deposited 09 Jul 2019 16:36) [Currently Displayed]
UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.