By Jean-Jacques Laffont
Extra then only a textbook, A idea of Incentives in Procurement and Regulation will advisor economists' examine on law for future years. It makes a tough and big literature of the hot regulatory economics obtainable to the common graduate pupil, whereas supplying insights into the theoretical principles and stratagems now not on hand in other places. in line with their pathbreaking paintings within the software of principal-agent thought to questions of law, Laffont and Tirole increase a man-made method, with a selected, although no longer particular, specialise in the rules of average monopolies equivalent to army contractors, application businesses, and transportation gurus. The book's transparent and logical association starts off with an creation that summarizes regulatory practices, recounts the heritage of proposal that ended in the emergence of the hot regulatory economics, units up the elemental constitution of the version, and previews the commercial questions tackled within the subsequent seventeen chapters. The constitution of the version built within the introductory bankruptcy is still a similar all through next chapters, making sure either balance and consistency. The concluding bankruptcy discusses very important components for destiny paintings in regulatory economics. each one bankruptcy opens with a dialogue of the commercial matters, an off-the-cuff description of the appropriate version, and an summary of the implications and instinct. It then develops the formal research, together with adequate factors for people with little education in info economics or video game thought. Bibliographic notes supply a old point of view of advancements within the zone and an outline of complementary study. special proofs are given of all significant conclusions, making the e-book useful as a resource of recent learn concepts. there's a huge set of overview difficulties on the finish of the publication. Jean-Jacques Laffont is Professor of Economics at Université des Sciences Sociales in Toulouse the place Jean Tirole is medical Director on the Institut d'Economié Industrielle.
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Previous page See Fudenberg et al. (1987) for related ideas. page_28 next page > If you like this book, buy it! < previous page page_29 next page > Page 29 be self-fulfilling prophecies. Although a more detailed analysis would be warranted, the possibility of the public delaying consumption does make experimentation more difficult. In this connection it would be interesting to analyze the properties of a simpleminded constitution or law forcing government to track average cost (with a lag) as under standard cost-of-service regulation.
39. Nonbinding price caps signal completely ineffective price regulation if the regulatory structure is fixed. If the regulated firm enjoys a high-powered incentive scheme such as PC regulation (for reasons to be discussed in this book), and if it is concerned that political pressure might push for a return to more traditional regulation such as COS, it may strategically charge prices below the ceiling even if the ceiling is below the monopoly price, while it would not do so in the absence of uncertainty about the mode of regulation.
When ). Relevance of Coase's Criticism Because experimentation with prices way above marginal cost is socially costly, the regulator would ideally want to experiment only for a short period of time. If this is sufficient to learn whether production is socially desirable, then ex ante imperfect knowledge of the demand curve is not a serious matter. In practice there are several reasons why price experimentation cannot be performed rapidly. First, there is the cost of changing price: Prices must be widely advertised for the experiment to be successful.
A theory of incentives in procurement and regulation by Jean-Jacques Laffont