In yardstick competition, the monopoly regulation is determined by comparing (benchmarking) cost and performance similar undertakings. This is done through standard pricing, which can be obtained in a simple way by the average of all costs of similar companies. In this way, companies with superior performance than the average generate profit, while those that do not, suffer losses. The effort to reduce business costs results in lower costs and, ultimately, means low tariffs. It is aligned to two central objectives of regulation: increasing productive efficiency, and reducing information asymmetry.
The yardstick competition regulation has features aligned to the objectives of incentives for production efficiency and reduce the asymmetry of information.