This paper analyzes the role of yardstick competition for improving political decisions. The concept of workable competition offers a verbal listing of conditions facilitating both efficiency dimensions. Besley and smart 2007 also observe that yardstick competition can be welfare diminishing when compared to a situation in which the voters ignore their neighbors scal performance. Natural monopoly operators regulated by yardstick competition, such as electric ity network operators and water distribution utilities, have merged re peatedly in recent years. Yardstick competition, hospital regulation, emergency care, game theory, queueing theory. This article explains how the method works and when it might not work as well. Helmberger argued that an important factor in determining the existence of the yardstick effect was the cooperatives membership policy. Industry structure and collusion with uniform yardstick. Sep 10, 2018 given the differentiation of the influence of different intermittent generation integration scenarios upon grid security and the absence of unified assessment standards, this paper utilizes the theory of relative competition to propose a yardstick competition based single indicator assessment method, so as to determine the weight with variation. Theory and evidence from china while some scholars argue that fiscal decentralization gave chinese local officials strong incentives to. We examine how performance comparisons across jurisdictions affect the agency problem resulting from uncertainty about politicians adverse selection and their. The nature of multimarket competition proves to be essential. This may be consistent with a theory where voters can only judge whether a tax increase was warranted when. Yardstick competition needs the existence of comparable jurisdictions.
Besley and smart 2007 also observe that yardstick competition can be welfare diminishing when compared to a situation in which. It may operate in a geographic location with different organic growth levels. Given the differentiation of the influence of different intermittent generation integration scenarios upon grid security and the absence of unified assessment standards, this paper utilizes the theory of relative competition to propose a yardstick competition based single indicator assessment method, so as to determine the weight with variation. Perfect competition resembles cournot competition under conditions of low minimum efficient scale and free entry novshek and sonnenschein 1987. The paper also explores what limitations on yardstick mechanisms can justify the use of longterm contracts. The yardstick method is a triedandtrue way to measure economic damages in contract breach, patent infringement and other tort claims. This comprehensive, userfriendly reference helps teachers and administrators use knowledge of child development to shape classrooms and schools where all children can succeed. Yardstick competition for transport infrastructure services halshs. By comparing their incumbents performance with the performance of administrators in similar jurisdictions, voters can reelect good politicians and send nonperformers packing. This sharply contrasts with the dynamic of regulation without such competition.
The theory of political yardstick competition states that a comparison of public service levels and tax rates with those in nearby jurisdictions can provide voters with a useful instrument to assess politicians performance. The yardstick theory, compares a company with another that carries out a similar kind of work. Corruption, decentralization and yardstick competition christopher j. An experimental inquiry into the effect of yardstick. The aim to remove this bias may be an additional reason for fiscal equalization. We briefly discuss some works on agency theory in a multiple agent setting first before discussing yardstick competition and individual regulation. A crucial feature of workable competition is the force of potential rivalry. This regulatory scheme is known to provide costreduction incentives and serves as the theoretical underpinning behind the hospital prospective. The yardstick location may face a lower level of competition. This literature has not yet considered the impact of yardstick competition on tax instrument choice.
Pdf price cap regulation is favoured by many regulators of network utilities because it provides firms with an incentive to reduce costs. This mechanism has a significant information advantage. Theory suggests that any target relating to yardstick competition or otherwise that is credible and achievable should be sufficient to incentivise firms to meet or outperform it, since the company retains a positive share of savings made beyond the target. Pdf yardstick competition and political agency problems.
Pdf conditional yardstick competition researchgate. Pdf the purpose of this report is to elaborate and summarize the. This study reports theorytesting laboratory experiments on the effect of yardstick competition on corruption. The theory of political yardstick competition ignores fiscal disparities. We show that yardstick competition can do better than an individual one when performances are correlated. However, jurisdictions, even if they operate in the same institutional setting, have the same service responsibilities, and are susceptible to common exogenous shocks, differ with respect to fiscal capacity and spending need e.
Corruption, decentralization and yardstick competition. A modified yardstick competition mechanism springerlink. A theory of yardstick competition andrei shleifer in the typical regulatory scheme a franchised monopoly has little incentive to reduce costs. In order to investigate the presence of yardstick competition, one has to. Therefore there is a need for alternative regulatory instruments. A theory of endogenous yardstick political competition. Yardstick theory is a boutique assessment business that gauges customer service delivery to advance client relations for organizations in the cultural arts, entertainment, and hospitality industries. Combines theoretical, methodological, and empirical findings. The selected yardstick may not be comparable or provide a reliable indicator of damages.
Abstract several empirical studies have found a negative relationship between corruption and the decentralization of the powers to tax and spend. This time, the introduction of yardstick competition acts both as a selection and a discipline device. However, both regulators and the uk competition commission which. This article uses spatial econometrics to test for yardstick competition in the decision to adopt an. All that follows can also be obtained using continuous density functions for the random variables, however this adds little to the economics of our analysis and has been suppressed. Yardstick competition among governments pierre salmon. The study of sources of potential entry and market games identifies cases of intermediate competition which can serve as a welfaretheoretic yardstick for the evaluation of market performance. Theories for competitive advantage research online. Principles of using efficiency measures in the reference section on price level regulation covers benchmarking and yardstick regulation. Written with warmth and humor, yardsticks offers clear descriptions of childrens development. Theories of competition and market performance springerlink.
Incentive regulation and the objectives of regulation. Pdf industry structure and collusion with uniform yardstick. Section 5 discusses prospective reimbursement as an example of yardstick competition in some detail. Evaluating the competitive yardstick effect of cooperatives. The seminal paper by shleifer 16 a theory of yardstick competition has been followed by a large number of theoretical developments, but a relatively modest number of practical applications in an even more modest number of countries, mainly the uk. Fiscal disparities bias the yardstick used by voters to assess incumbents. Sep 16, 2008 this paper expands shleifers rand j econ 16. In this paper, we explain the existence of interjurisdictional competition among chinese local officials using a model of yardstick competition from the top, in which the central government and not local voters creates a competition among local officials by rewarding or punishing them on the basis of relative economic performance. Except for political yardstick competition, strategic horizontal interaction also may result from spillover effects, such as when expenditures on local public services have beneficial or detrimental effects on nearby jurisdictions case, rosen, and hines, 1993 or result from tax or welfare competitions wildasin, 1988.
Industry structure and collusion with uniform yardstick competition. Links yardstick competition to insights of political economy and principalagent theory. If faced with a downwardsloping demand function or increasing average processing costs, only an openmembership cooperative could be expected to exert a yardstick effect on competition. E ectively, it assumes that production is instantaneous, or equivalently. Yardstick competition is a regulatory scheme for local monopolists e. Corruption, decentralization and yardstick competition 273 this particular stochastic structure is chosen to bring the results into sharp relief. Theory and evidence from china may 2010 abstract while some scholars argue that scal decentralization gave chinese local governors strong incentives to promote local economic growth, traditional scal federalism theories are not directly relevant to explain such an e. Yardstick competition uses data from regulated firms relating to the inputs and. I analyse a yardstick competition game using a spatial voting model, where voters vote for a candidate according to the distance between their ideal point and the policy selected by a candidate. If you use someone or something as a yardstick, you use them as a standard for. With yardstick competition, prices for regional monopolies are set by a regulator on the basis of actual costs of similar. Political yardstick competition is seen as an instrument helping voters get a grip on elected administrators at relatively low cost e. In the yardstick theory, the principle is applied in such a way that it compares the plaintiffs sales or profit during the period of impact of the antitrust violation to those of a similar company that was not affected by the defendants anti. Our main contribution is to develop a theory and a method of testing different diffusion.
Yardstick competition, fiscal disparities, and equalization. Yardstick competition among governments accountability and policymaking when citizens look across borders pierre salmon. In equilibrium each firm chooses a socially efficient level of cost. Possibilities of this sort do not arise in my model, because the markets of individual firms do not overlap. This paper deals with the staticdynamic efficiency tradeoff. Many industries are subject to yardstick regulation. Tiebout competition, yardstick competition, and tax. In the context of regulated network industries, yardstick. Previous research has shown that tieboutstyle fiscal competition among local governments reduces the likelihood of adopting income taxes. A theory of endogenous yardstick political competition abstract this paper develops a theory of endogenous yardstick political competition to examine. Competition and market performance 111 variable cost pricing if information on prices is perfect varian 1984, p. Accountability and yardstick competition in the public.
While the economic rationale behind yardstick competition is sound, the theory outlined above abstracts away one important aspect of service provision. A reexamination of yardstick competition 35 signed to reduce the performance of others. As we argue in section 2, the key insight of yardstick competition theory is that tax setting behavior and the features of the electoral system should be considered at once in the empirical analysis. The policy which is closest to a voters ip provides the voter with a higher utility so that minimizing the distance means maximising the utility. The yardstick location may have a supercompetent branch manager. May 2010 abstract while some scholars argue that scal decentralization gave chinese local o. Yardstick competition for service systems 3 yardstick competition in services. In this paper we explain this phenomenon using a model of yardstick competition. Yardstick theory law and legal definition uslegal, inc. Theory suggests that any target relating to yardstick competition or otherwise. However, we argue that fiscal disparities bias this yardstick, and that this bias may be removed through fiscal. Some analysts consider benchmarking or yardstick analysis to be an input into rate of return regulation, price cap regulation, or revenue cap regulation rather than as method of incentive regulation that could be used by itself.
Yardstick competition is shown to generalize easily, at least for the range of perturbations i explore. The results reveal that on the incumbents side, yardstick competition acts as a corruptiontaming mechanism only if the incumbent politician is female. This study reports theory testing laboratory experiments on the effect of yardstick competition on corruption. Are the incentives for firms to merge horizontally under yardstick regulation actually aligned with social and consumer welfare. Yardstick competition economics of competition and monopoly the core discussion of yardstick competition comes from shleifer 1985. Specifically, voters seem to make yardstick comparisons for the personal income tax when both governors are democrats. In the typical regulatory scheme a franchised monopoly has little incentive to reduce costs. Concepts of competition whether a firm can be regarded as competitive depends on several factors, the most important of which are. The hypothesis underlying this report is that yardstick competition might be an efficient way to. This article proposes a mechanism in which the price the regulated firm receives depends on the costs of identical firms.
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