Implementing Efficient Market Structures: The Role of Information Transmission - 10.1628/001522115X14180267843162 - Mohr Siebeck
Economics

Eberhard Feess, Michael Paust

Implementing Efficient Market Structures: The Role of Information Transmission

Section: Articles
FinanzArchiv (FA)

Volume 71 () / Issue 2, pp. 240-277 (38)

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We extend the literature on the implementation of efficient market structures to private information on marginal costs. We consider a setting with an incumbent and two potential entrants whose costs can be either high or low. By setting the license fee appropriately, the regulator can induce truth-telling by the potential entrants, and can then implement the welfare-maximizing market structure. We distinguish between a disclosure policy, where the regulator reveals the types of entrants before the market game is played, and a concealment policy, where he keeps silent about types. While the concealment policy is predominant in practice, we show that the disclosure policy leads to higher social welfare.
Authors/Editors

Eberhard Feess No current data available.

Michael Paust No current data available.