INCENTIVE REGULATION IN OLIGOPOLY INDUSTRY
WELFARE EFFECTS OF THE EX POST ADJUSTMENT SYSTEM
1992 年 43 巻 3 号 p. 193-209
詳細
1992 年 43 巻 3 号 p. 193-209
The present paper examines the welfare effect of ex post rate-of-return regulation. Unlike the traditional rate-of-return regulation on a monopoly, the regulation is mainly for oligopolistic industries and of the ex post nature. At the end of each year, total revenue of the firms as a whole is calculated. If the revenue is greater than the revenue requirement of all firms, a portion of the excess is taxed from the firms according to a certain prescribed rule. On the other hand, if the revenue falls short of the revenue requirement, the agency subsidizes the firms for the shortage. It is shown how the regulation affects social welfare by creating an artificial competitive environment for the firms and by controlling industry cost efficiency. The optimal regulation is also analyzed.
