Journal Article

DOES INCENTIVE COMPATIBLE MECHANISM DESIGN INDUCE COMPETITIVE ENTRY?

Sumit K. Majumdar

in Journal of Competition Law & Economics

Volume 7, issue 2, pages 427-453
Published in print June 2011 | ISSN: 1744-6414
Published online January 2011 | e-ISSN: 1744-6422 | DOI: https://dx.doi.org/10.1093/joclec/nhq028
DOES INCENTIVE COMPATIBLE MECHANISM DESIGN INDUCE COMPETITIVE ENTRY?

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This article evaluates the impact of the introduction of incentive regulation on competitive entry in the territories of the firms making up the population of local exchange carriers in the United States between 1988 and 2001. The results show that the rate of return method and other intermediate incentive schemes have had a negative impact on competitive entry. Conversely, the introduction of pure price caps schemes had a positive and significant impact on competitive entry in incumbent telecommunications firms' markets. These results highlight the importance of proper and appropriate incentive compatible mechanism design in altering the playing field so that competitive entry can occur.

Keywords: L43; L51; L96

Journal Article.  10775 words.  Illustrated.

Subjects: Regulation and Industrial Policy ; Energy and Utilities ; Antitrust Issues and Policies

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