50 research outputs found

    Bargaining and Collusion in a Regulatory Model

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    We consider the regulation of a monopolistic market when the prin- cipal delegates to a regulatory agency two tasks: the supervision of the firm's unknown costs and the arrangement of a pricing mechanism. As usual, the agency may have an incentive to hide information from the principal to share the informative rent with the firm. The novelty of this paper is that both the regulatory mechanism and the side con- tracting between the agency and the firm are modelled as a bargaining process. This negotiation between the regulator and the monopoly induces a radical change in the extraprofit from private information, which is now equal to the standard informational rent weighted by the agency’ bargaining power. This in turn a¤ects the collusive stage, in particular the firm has the greatest incentive to collude when fac- ing an agency with the same bargaining power. Then, we focus on the optimal organizational responses to the possibility of collusion. In our setting, where incompleteness of contracts prevents the design of a screening mechanism between the agency’ types and thus Tirole’ equivalence principle does not apply, we prove that the stronger the agency in the negotiation process, the greater the incentives for the principal to tolerate collusion in equilibrium.regulation, bargaining, collusion.

    The strategic value of partial vertical integration

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    We investigate the incentive for partial vertical integration, namely, partial ownership agreements between manufacturers and retailers, when the retailers are privately informed about their production costs and engage in differentiated good price competition. Partial vertical integration entails an “information vertical effect”: the partial misalignment of pro.t objectives within a partially integrated manufacturer-retailer hierarchy involves costs from asymmetric information that reduce the hierarchy’s profitability. This translates into an opposite “competition horizontal effect”: the partially integrated hierarchy commits to a higher retail price than under full integration, which strategically relaxes competition. The equilibrium degree of vertical integration trades o¤ the benefits of softer competition against the informational costs

    Bargaining and collusion in a regulatory relationship

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    We investigate regulation as the outcome of a bargaining process between a regulator and a regulated firm. The regulator is required to monitor the firm’s costs and reveal its information to a political principal (Congress). In this setting, we explore the scope for collusion between the regulator and the firm, which results in the manipulation of the regulator’s report on the firm’s costs to Congress. The firm’s bene.t of collusion arises from the higher price the efficient firm is allowed to charge when the regulator reports that it is inefficient. However, a higher price reduces the gains from trade the parties can share in the bargaining process. As a result of this trade-off, the efficient firm has a stake in collusion only if the regulator’s bargaining power in the regulatory relationship is relatively high. Then, we derive the optimal institutional response to collusion and characterize the conditions under which allowing collusion is desirable

    Mergers between regulated firms with unknown efficiency gains

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    In an industry where regulated firms interact with unregulated suppliers, we investigate the welfare effects of a merger between regulated firms when cost synergies are uncertain before the merger and their realization becomes private information of the merged firm. The optimal merger policy trades off potential cost savings against regulatory distortions from informational problems. We show that, as a consequence of this trade-off, more intense competition in unregulated segments of the market induces a more lenient merger policy. The regulated firms' diversification into a competitive segment of the market can lead to a softer merger policy when competition is weaker

    Storable good market with intertemporal cost variations

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    In a storable good market, we investigate a firm’s pricing policy and the welfare effects associated with the firm’s ability to commit to future prices in the presence of time-varying production costs. We show that, if costs are expected to increase, the firm’s lack of commitment leads to lower prices than full commitment when consumer storage costs are relatively small and demand is not too convex. This enhances consumer surplus and, under certain circumstances, total welfare. For intermediate consumer storage costs, the firm’s full commitment generally benefits consumers and, a fortiori, the whole economy. Our analysis provides potentially significant empirical and policy implications, especially regarding the patterns of cost pass-through rates

    COVID-19 in rheumatic diseases in Italy: first results from the Italian registry of the Italian Society for Rheumatology (CONTROL-19)

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    OBJECTIVES: Italy was one of the first countries significantly affected by the coronavirus disease 2019 (COVID-19) epidemic. The Italian Society for Rheumatology promptly launched a retrospective and anonymised data collection to monitor COVID-19 in patients with rheumatic and musculoskeletal diseases (RMDs), the CONTROL-19 surveillance database, which is part of the COVID-19 Global Rheumatology Alliance. METHODS: CONTROL-19 includes patients with RMDs and proven severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) updated until May 3rd 2020. In this analysis, only molecular diagnoses were included. The data collection covered demographic data, medical history (general and RMD-related), treatments and COVID-19 related features, treatments, and outcome. In this paper, we report the first descriptive data from the CONTROL-19 registry. RESULTS: The population of the first 232 patients (36% males) consisted mainly of elderly patients (mean age 62.2 years), who used corticosteroids (51.7%), and suffered from multi-morbidity (median comorbidities 2). Rheumatoid arthritis was the most frequent disease (34.1%), followed by spondyloarthritis (26.3%), connective tissue disease (21.1%) and vasculitis (11.2%). Most cases had an active disease (69.4%). Clinical presentation of COVID-19 was typical, with systemic symptoms (fever and asthenia) and respiratory symptoms. The overall outcome was severe, with high frequencies of hospitalisation (69.8%), respiratory support oxygen (55.7%), non-invasive ventilation (20.9%) or mechanical ventilation (7.5%), and 19% of deaths. Male patients typically manifested a worse prognosis. Immunomodulatory treatments were not significantly associated with an increased risk of intensive care unit admission/mechanical ventilation/death. CONCLUSIONS: Although the report mainly includes the most severe cases, its temporal and spatial trend supports the validity of the national surveillance system. More complete data are being acquired in order to both test the hypothesis that RMD patients may have a different outcome from that of the general population and determine the safety of immunomodulatory treatments

    The Regulation of Interdependent Markets

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    We examine the issue of whether two monopolists which produce substitutable goods should be regulated by one (centralization) or two (decentralization) regulatory authorities, when the regulator(s) can be partially captured by industry. Under full information, two decentral- ized agencies - each regulating a single market - charge lower prices than a unique regulator, making consumers better off. However, this leads to excessive costs for the taxpayers who subsidize the …rms, so that centralized regulation is preferable. Under asymmetric informa- tion about the firms' costs, lobbying induces a unique regulator to be more concerned with the industry's interests, and this decreases social welfare. When the substitutability between the goods is high enough, the firms'lobbying activity may be so strong that decentralizing the regulatory structure may be social welfare enhancing

    Bargaining and Collusion in a Regulatory Model

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    Within a standard three-tier regulatory model, a benevolent prin- cipal delegates to a regulatory agency two tasks: the supervision of the …rm’s (two-type) costs and the arrangement of a pricing mecha- nism. The agency may have an incentive to manipulate information to the principal to share the gains of collusion with the …rm. The novelty of this paper is that both the regulatory mechanism and the side contracting between the agency and the …rm are modelled as a bargaining process. While as usual the ine¢ cient …rm does not have any interest in cost manipulation, we …nd that the e¢ cient …rm has an incentive to collude only if the agency’s bargaining power is high enough, and the total gains of collusion are now lower than those the two partners would appropriate if the agency could make a take-it-or- leave-it o¤er. Then, we focus on the optimal institutional responses to the possibility of collusion. In our setting, where the incomplete- ness of contracts prevents the principal from designing of a screening mechanism and thus Tirole’s equivalence principle does not apply, we show how the players’bargaining powers crucially drive the optimal response to collusion
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