Regulation through a revenue contest |
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Authors: | Haldun Evrenk E Ünal Zenginobuz |
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Institution: | (1) Centre for Energy, Petroleum and Mineral Law and Policy, University of Dundee, Dundee, UK;; |
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Abstract: | This paper proposes a mechanism for the regulation of duopolies a revenue contests among the firms. Under the mechanism, the
firm with the lower revenue is to pay a penalty to the firm with the higher revenue proportional to the difference between
their revenues. In a homogenous good Cournot duopoly with convex cost and demand functions, the mechanism implements the optimal
outcome when the firms have symmetric costs. When one firm is more efficient, the mechanism leads to increased social surplus
under a large set of parameters. We also consider extensions that involve cost uncertainty, repeated games and differentiated
goods. |
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Keywords: | |
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