Regulating a monopolist with limited funds

Axel Gautier () and Manipushpak Mitra

Economic Theory, 2006, vol. 27, issue 3, 705-718

Abstract: We consider the problem of regulating a monopolist with unknown costs when the regulator has limited funds. The optimal regulatory mechanism satisfies four properties. The first property is bunching at the top, that is the more efficient types produce the same quantity irrespective of their costs. The second property is separability of less efficient types. The third property is full bunching of types when the available fund is small enough. The fourth property of the mechanism is that it is a third best one, that is, the output under this regulatory mechanism is strictly lower than the second best output for any given type. Copyright Springer-Verlag Berlin/Heidelberg 2006

Keywords: Regulation; Asymmetric information; Limited funds. (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s00199-004-0555-8

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