search query: @author Armstrong, M. / total: 21
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| Author: | Armstrong, M. |
| Title: | Optimal regulation with unknown demand and cost functions |
| Journal: | Journal of Economic Theory
1999 : FEB, VOL. 84:2, p. 196-215 |
| Index terms: | Demand Costs Optimization Models |
| Freeterms: | Regulation |
| Language: | eng |
| Abstract: | In the paper, there is an analysis presented of optimal regulation of a firm that has private information about both its demand and cost functions. An earlier paper on the topic in question, Lewis and Sappington (Rand J. Econ. 1998, 19, p. 438-457), is reviewed, difficulty with their analysis is discussed, and an alternative formulation of their model is proposed. Two broad classes of problem are considered: (i) the case where social and private incentives are roughly aligned, which implies optimal prices are above marginal costs, and (ii) the case where social and private incentives diverge, which implies pricing below marginal cost may be optimal. |
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