Monopolization of a Regulated Industry Using Tradable Permits
Éditorial: [s.l: s.n.]
Année de publication: 2005
Pages: 22
Congreso: Encuentro de Economía Pública (12. 2005. Palma de Mallorca)
Type: Communication dans un congrès
Résumé
Tradable permits or licenses may be used as a barrier to entry in order to gain market power. In particular, a single entrant may be the only candidate to buy all the permits and monopolize the regulated industry under many circumstances. Therefore, we can bring into the permit market the idea of �takeover� that stems from Grossman and Hart�s (1980) seminal work. Both in symmetric, pure- and mixed-strategy equilibria, the entrant�s expected profit, and hence the probability of entry, decreases as the number of incumbents increases. Thus, the less competition in the industry before regulation, the more likely monopolization.