In this paper, we analyze the optimal regulation policy when the regulated firm has better information concerning the market demand than the regulator. We show that introducing a cost on public funds into the Planner's objective function does not lead to qualitative results similar to those obtained by introducing distributional considerations. In particular we show that under constant marginal cost the full information policy is not implementable and that the optimal regulatory policy results in informational rents. The social value of private information and the firm's informational rents are both increasing functions of the cost of the public funds. Copyright 2004 Blackwell Publishing Inc..
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.