Regulation of Cost and Quality under Yardstick Competition

Arbeitspapier

This paper analyses simultaneous regulation of cost and quality when firms have private, correlated information about productivity and the regulator receives a signal about quality. It is shown that managerial effort and expenditures on quality are positively correlated in the optimal contract. The higher is firm productivity the more should the firm spend on quality improvement and the more efficiently should it produce. Optimal yardstick competition reduces distortion of both effort and quality. Under product market competition expenditures on quality should be increasing in the firm's own productivity and decreasing in the competitor's productivity.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IUI Working Paper ; No. 573

Classification and Topics

• Classification: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Analysis of Health Care Markets ; Health: Government Policy; Regulation; Public Health ; Economics of Regulation
• Subject: Yardstick Competition ; Quality ; Regulation ; Regulierung ; Anreizregulierung ; Qualitätsmanagement ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Tangerås, Thomas P.
• Event: Veröffentlichung
• (who): The Research Institute of Industrial Economics (IUI)
• (where): Stockholm
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/94924
• Last update: 10.03.2025, 11:42 AM CET