Regulation and industrial policy, competition policy

Keywords: competition, transport operators, regulation, antitrust, incentives, contracts.

In competition policy, research mainly deals with the institutional organization of public action, which is crucial for markets to be operational. We can list some important questions that are at the heart of recent research on this topic and that are also debated by antitrust practitioners. Commitments negotiated by companies with antitrust authorities have played a predominant role in the settlement of alleged antitrust practices for the past ten years or so. It is crucial to assess the effect of such a practice. Merger control is considered to be insufficiently restrictive by some. It is important to determine the effect of tightening or loosening such control. The question of the relationship between competition policy and other sector-specific regulations remains central: what should the purpose of a competition authority be? Should sector-specific regulation be paramount in the event of conflict with the antitrust authorities’ stance? These are some of the issues addressed by our research.

The nature of sustainable mobility and energy supply services is changing in smart cities. Traditional schemes for managing public services, including incentive contracts, need to evolve to adapt to innovative urban service specificities. Economic literature is unanimous on the fact that the incentive power of contracts used by public authorities in charge of providing a service has a significant effect on the costs of the service operator. Researchers build models using techniques that combine two important currents in the literature: on the one hand, any expenditure depends on the technical capacity of the company, but also on the will of managers and employees involved in the production process. A low incentive environment due to a lack of employee productivity leads to inefficiency, while appropriate incentives can lead to significant reductions in operating costs. On the other hand, since new regulation theory has emerged, it is well established that the principal-agent relationship is central to the question of assessing a company’s performance in industries where a producer is regulated by an authority. Using incentive contracts can encourage transport operators to reduce their costs. But it is also important to remember that the optimal nature of these contracts is guaranteed only if the incentive power of each contract is adjusted to the productive efficiency of the transport operator. In other words, a fixed-price contract should be offered to a highly efficient company while a cost-of-service contract should be offered to a highly inefficient company. Other types of contracts with intermediate incentive powers could be designed for operators characterized by average levels of efficiency. The capacity to design such contracts as well as a good understanding of the volume of subsidies to be paid to operators depends on the expertise capacity of public authorities. The role of economists in this context is therefore to encourage said authorities to equip themselves with the adequate means to implement the sophisticated tools that economic research sometimes suggests.

  • Researchers: Catherine Bobtcheff, Bernard Caillaud, Pierre Fleckinger, Philippe Gagnepain, David Martimort, Carine Staropoli, Jean-Philippe Tropeano
  • PhD Student: Clément Gras

« 5 papers… in 5 minutes ! » linked with this thematic

Catherine Bobtcheff, Claude Crampes, Yassine LefouiliIndustry policy: watch out for the backlash!

Alexandra Belova, Philippe Gagnepain, Stéphane GauthierMarket power and volatility in the air transport industry

Andréea Cosnita, Jean-Philippe TropéanoHow can anti-competitive behaviour be proscribed?