Soft Capture

Scientific conference (2010, November 25)

Capture of regulatory agencies by firms or other stakeholders has given rise to a rich literature, much of which is dominated by models in which the motivation for the welfare-reducing behavior is found ... [more ▼]

Capture of regulatory agencies by firms or other stakeholders has given rise to a rich literature, much of which is dominated by models in which the motivation for the welfare-reducing behavior is found in side-contracting (bribes, corruption), threats (blackmail, political support) or corresponding mechanisms for repeated games (reputation, career concerns, signaling for promotion). Notwithstanding, the empirical support for monetary corruption and 'revolving doors' is scarce and inconclusive. We propose an alternative and more intuitive model for regulatory capture that is based on information transmission and asymmetric information. In a three-tier model, a regulator is charged by a political principal to provide a signal for the type of a regulated firm. Only the firm can observe his type and the production of a correlated signal with a given accuracy is costly for the regulator. The firm can costlessly provide an alternative signal of lower accuracy that is presented to the regulator. In a self-enforcing equilibrium, the regulator transmits the firm-produced signal, internalizes its own savings in information cost and the firm enjoys higher information rents. The main feature of soft capture is that it is not based on a reciprocity of favors but on a congruence of interests between the firm and the regulator. [less ▲]

Price Competition under Universal Service Obligations

Conference (2010, September)

In industries like telecom, postal services or energy provision, universal service obligations (uniform price and universal coverage) are often imposed on one market participant. Universal service ... [more ▼]

In industries like telecom, postal services or energy provision, universal service obligations (uniform price and universal coverage) are often imposed on one market participant. Universal service obligations are likely to alter firms' strategic behavior in such competitive markets. In this paper we show that, depending on the entrant's market coverage and the degree of product differentiation, the Nash equilibrium in prices involves either pure or mixed strategies. We show that the pure strategy market sharing equilibrium, as identified by Valletti et al. (2002) defines a lower bound on the level of equilibrium prices. [less ▲]

Scoring-rule and the choice of a contractor by a financially constrained government

Conference (2010, June 15)

Governments and public authorities are increasingly relying on Public-Private Partnerships for the provision of public goods and services. It is often argued that the use of a public private partnership ... [more ▼]

Governments and public authorities are increasingly relying on Public-Private Partnerships for the provision of public goods and services. It is often argued that the use of a public private partnership can relieve the government from a strained budget constraint and, in this paper, we analyze the choice of a contractual solution for designing, constructing and managing a project, with observable externalities, by a budget-constrained government. We show that the quality of the project and the designed contractor are affected by the extent of the budget constraint and we show that the use of a PPP may partially overcome the resulting inefficiencies. [less ▲]

Universal service financing in competitive postal markets: One size does not fit all

Conference (2010, March)

In the postal sector, the financial burden of the universal service depends on its content, the postal market characteristics and the country’s geographical configuration. These three groups of factors ... [more ▼]

In the postal sector, the financial burden of the universal service depends on its content, the postal market characteristics and the country’s geographical configuration. These three groups of factors affect both the direct cost of providing the service and the extent of competition on the market. In this paper, we consider countries with different geographical characteristics and we show that the choice of an appropriate mechanism to share the burden of universal service between market participants depends on the country configuration. Thus, for universal service financing, one size does not fit all. [less ▲]

The benefit and cost of winner-picking: Redistribution vs. Incentives

in Journal of Institutional and Theoretical Economics = Zeitschrift für die Gesamte Staatswissenschaft (2009), 165(4), 622-649

This paper examines the agency cost of winner-picking in multidivision firms and uses explicit incentive contracts to analyze the interaction between corporate headquarters' investment and incentive ... [more ▼]

This paper examines the agency cost of winner-picking in multidivision firms and uses explicit incentive contracts to analyze the interaction between corporate headquarters' investment and incentive policies. Winner-picking, i.e. the efficient reallocation of scarce resources in an internal capital market, adds an extra layer of noise to the moral hazard problem of incentivizing division managers to produce the resources that can then be redistributed. In particular, division managers with strong future investment opportunities anticipate that headquarters will bail them out should they fail to produce enough resources themselves. This reduces incentives to create the resources in the first place with possible consequences for the optimal investment policy. [less ▲]

Regulation of an Open Access Essential Facility

in Economica (2008), 75

A vertically integrated firm owns an essential input and operates on the downstream market. There is a potential entrant in the downstream market. Both firms use the same essential input. The regulator’s ... [more ▼]

A vertically integrated firm owns an essential input and operates on the downstream market. There is a potential entrant in the downstream market. Both firms use the same essential input. The regulator’s objectives are (i) to ensure financing of the essential input and (ii) to generate competition in the downstream market. The regulatory mechanism grants non-discriminatory access of the essential facility to the entrant provided it pays a two-part tariff to the incumbent. The optimal mechanism generates inefficient entry. The inefficient entry captures the trade-off between market efficiency and infrastructure financing resulting from incomplete information and non-discriminatory access. [less ▲]

La libéralisation du secteur postal

in Regards économiques (2008), 60

En 2011, le marché postal sera entièrement libéralisé. Le service universel sera-t-il maintenu ? Comment sera-t-il financé ? Dans cet article, nous abordons la question du financement du service universel ... [more ▼]

En 2011, le marché postal sera entièrement libéralisé. Le service universel sera-t-il maintenu ? Comment sera-t-il financé ? Dans cet article, nous abordons la question du financement du service universel postal dans un environnement concurrentiel. La Commission européenne propose plusieurs pistes, les Etats Membres doivent maintenant choisir la solution la plus appropriée à leur marché. [less ▲]

National Postal Strategies after a Full Postal Market Opening

in Crew, Michael; Kleindorfer, Paul (Eds.) Competition and Regulation in the Postal and Delivery Sector (2008)

Teaching versus research: A multi-tasking approach to multi-department universities

in European Economic Review (2007), 51(2), 273-295

We study the possible implications of incentive schemes as a tool to promote efficiency in the management of universities. In this paper, we show that by designing internal financial rules which create ... [more ▼]

We study the possible implications of incentive schemes as a tool to promote efficiency in the management of universities. In this paper, we show that by designing internal financial rules which create yardstick competition for research funds, a multi-department university may induce better teaching quality and research, as compared to the performance of independent departments. [less ▲]

Network financing with two-part and single tariffs

in Dewenter, R.; Haucap, J. (Eds.) Access Pricing: Theory and Practice (2007)

In this paper, we compare two types of access pricing: a two-part tariff where the fixed part aims to cover (part of) the network’s fixed cost while the variable part covers the network’s usage costs and a ... [more ▼]

In this paper, we compare two types of access pricing: a two-part tariff where the fixed part aims to cover (part of) the network’s fixed cost while the variable part covers the network’s usage costs and a single tariff where both the usage and (part of ) the infrastructure costs are covered by a per-unit access charge. We compare how the regulator trades-off the degree of competition induced by the access charges and the network financing. (JEL: L11, L51). [less ▲]