Learning by Doing and Dynamic Regulation

Tracy Lewis and Huseyin Yildirim

RAND Journal of Economics, 2002, vol. 33, issue 1, 22-36

Abstract: From experience, regulated monopolists learn to employ cost-reducing innovations. We characterize the optimal regulation of an innovating monopolist with unknown costs. Regulatory policy is designed to minimize current costs of service while encouraging development of cost-saving innovations. We find that under optimal regulation, (i) innovation is encouraged by light-handed regulation allowing the monopolist to earn greater information rents while providing greater service, (ii) innovation occurs in the absence of long-term agreements when private information is recurring, and (iii) innovation is more rapid in a durable franchise, and the regulator prefers durable franchises for exploiting learning economies.

Date: 2002
References: Add references at CitEc
Citations: View citations in EconPapers (33)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:33:y:2002:i:spring:p:22-36

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().