We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
REGULATING A MONOPOLIST WITH UNKNOWN COSTS.
- Authors
Baron, David P.; Myerson, Roger B.
- Abstract
We consider the problem of how to regulate a monopolistic firm whose costs are unknown to the regulator. The regulator's objective is to maximize a linear social welfare function of the consumers' surplus and the firm's profit. In the optimal regulatory policy, prices and subsidies are designed as functions of the firm's cost report so that expected social welfare is maximized, subject to the constraints that the firm has nonnegative profit and has no incentive to misrepresent its costs. We explicitly derive the optimal policy and analyze its properties.
- Subjects
MONOPOLIES; PRICES; INDUSTRIAL costs; TRADE regulation; COMPETITION; PRICE maintenance; PROFIT; CAPITAL; ECONOMICS
- Publication
Econometrica, 1982, Vol 50, Issue 4, p911
- ISSN
0012-9682
- Publication type
Article
- DOI
10.2307/1912769