Incomplete Regulation, Asymmetric Information and Collusion-Proofness

• Type: Article in International Scientific Journal
• Date: 2012

Authors

Marco Meireles (Author) FEP; Paula Sarmento (Author) FEP

Journal

Title: Economics research international

ISSN: n/a

Indexing

Econlit

Scientific classification

FOS: Social sciences > Economics and Business

CORDIS: Social sciences > Economics

Other information

Authenticus ID: P-013-F24

DOI: 10.1155/2012/818716

Abstract (EN): In an incomplete regulation framework, the regulator cannot replicate all the possible outcomes by himself since he has no influence over some firms in the market. Due to asymmetric information, it may be better for the regulator to allow the unregulated firms to extract a truthful report from the regulated firm through side-payments under collusion, and therefore the ¿collusion-proofness principle¿ may not hold. In fact, by introducing an exogenous number of unregulated firms, social welfare differences seem to favour a collusion-allowing equilibrium. However, such result will depend on the relative importance given by the regulator to the consumer surplus in the social welfare function.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 17