This paper examines the effects of a competitive fringe on a regulated firm. Using Hart's (1983) model, we show that competition weakens the managerial incentives for cost reduction: when there is correlation between the cost levels of the firms in the industry, costs are higher in the regulated...

This paper studies the optimal regulatory policy in a market where entry may occur. The regulator regulates the incumbent, but not the entrant in the event of entry. We show that the effect of entry on prices and incentives for cost reduction depends on the extent of the regulator's commitment:...

We study in this paper whether the price charged to a competitor for the use of an essential input produced in conditions of natural monopoly should reflect only considerations of relative efficiency between the various potential suppliers. In a model that captures the technological conditions...