Issues and Challenges in Regulation Economics
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Effective economic regulation demands clear objectives, sound economic reasoning and a careful analysis of the inevitable trade-offs between conflicting societal interests. The key problems are linked to the information asymmetry between the regulator and the regulated firms. Although the market principle may provide some useful guidelines, the problems of bankruptcy and windfall profits remain to be addressed. In this overview, we discuss how modern yardstick regimes in combination with franchise auctions provide powerful solutions that may contribute to both societal and industry demands.