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- Title
Regulating a Monopolist with Unknown Demand.
- Authors
Lewis, Tracy R.; Sappington, David E. M.
- Abstract
Optimal regulatory policy is derived in a setting where the firm has better knowledge of demand than the regulator. When marginal production costs increase with output, the regulator can induce the firm to use its private information entirely in the social interest. When marginal costs decline with output, however, the regulator is unable to derive any benefit from the firm's superior knowledge, and a single price is established that is invariant to demand.
- Subjects
ECONOMIC demand; BUSINESS enterprises; TRADE regulation; COMMERCIAL product marketing; SUPPLY &; demand; DIRECT costing; INTEREST (Psychology); PRICING; PRODUCTION (Economic theory)
- Publication
American Economic Review, 1988, Vol 78, Issue 5, p986
- ISSN
0002-8282
- Publication type
Article