Regulation under Financial Constraints

Axel Gautier ()

Annals of Public and Cooperative Economics, 2004, vol. 75, issue 4, 645-656

Abstract: Abstract This article studies a simple procurement problem (Laffont and Tirole,1993) where the regulator faces a cash‐in‐advance constraint. The introduction of such a constraint not only reduces the amount of public good provided but also limits the instruments available to the regulator. The wealth constraint could change the optimal regulatory contract from a two‐part tariff, where the quantities produced depend on the firm’s cost, to a less efficient fixed fee where the firm produces the same quantity whatever its cost.

Date: 2004
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https://doi.org/10.1111/j.1467-8292.2004.00266.x

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Working Paper: Regulation under financial constraints (2004)
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