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Regulating a monopolist with unknown demand and cost fuctions: a comment



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Regulation Initiative Working Paper Series

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This paper presents an analysis of optimal regulation of a single-product monoploy which has private information about both its cost and demand functions. An earlier paper on the same topic, Lewis and Sappington (1988a), is reviewed and a possible difficulty with their analysis is discussed. An alternative, discrete 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 prives are (weakly) above marginal costs, and (ii) the case where social and private incentives diverge, which implies pricing below marginal costs may be optimal

Publication Research Centre

Regulation Initiative (closed)

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Regulation Initiative Working Paper Series

Available on ECCH


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