A Class Of Performance-Based Subsidy Rules
AbstractWe provide a continuum of subsidy rules based on a performance indicator that induce a monopoly to choose the socially optimal production level. These subsidy rules result in a reduction of the amount of subsidy paid to the monopolist compared to the standard case where a constant subsidy rate is used. The subsidy rate depends on a state variable that reflects the monopolist's history of performance. This variable depreciates over time, therefore requiring a permanent effort of the monopolist to maintain it at an optimal level. In an example with a linear demand and no production cost, the subsidy costs of inducing efficiency are reduced by almost fifty per cent. On montre qu'il existe un continuum de rÃ¨gles de subvention basÃ©es sur un indice de performance qui peuvent inciter un monopoleur Ã produire la quantitÃ© qui maximise le bien-Ãªtre social. Avec ces rÃ¨gles, le gouvernement paie un montant total qui est de beaucoup infÃ©rieur Ã celui qu'il devrait payer dans le cas standard d'un taux d'aide constante. Le taux de subvention variable dÃ©pend de la valeur d'un stock qui reflÃ¨te l'histoire de performance du monopoleur.
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Bibliographic InfoArticle provided by Japanese Economic Association in its journal Japanese Economic Review.
Volume (Year): 59 (2008)
Issue (Month): 4 ()
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Other versions of this item:
- Hassan Benchekroun & Ngo Van Long, 2007. "A Class Of Performance-Based Subsidy Rules," Departmental Working Papers 2007-05, McGill University, Department of Economics.
- Hassan Benchekroun & Ngo Van Long, 2004. "Designing a Performance Indicator to Economize on Monopoly Subsidy," CIRANO Working Papers 2004s-08, CIRANO.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- L5 - Industrial Organization - - Regulation and Industrial Policy
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