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| Author: | Chen, P. |
| Title: | Prices vs. quantities and delegating price authority to a monopolist |
| Journal: | Review of Economic Studies
1990 : JUL, VOL. 57:3, p. 521-529 |
| Index terms: | PRICES QUANTITY MONOPOLY PRICING REGULATIONS COSTS |
| Language: | eng |
| Abstract: | The desirability of allowing a monopolist to determine the market price is examined. It is found that none of the regulatory mechanisms previously discussed in the "prices vs. quantities" literature strictly dominates unregulated, monopoly price-setting. Furthermore, despite suggestions by others, price-setting by a regulated monopolist whose profits coincide with the society's net benefits is not always the most desirable means of control. Quantity-setting by such a monopolist may instead be the preferred choice. Combining both into one incentive-compatible mechanism provides the best regulatory scheme and one in which the regulatory scheme and one in which the regulator need not be informed about costs. |
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