IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v15y1984ispringp108-115.html
   My bibliography  Save this article

On Delegating Price Authority to a Regulated Firm

Author

Listed:
  • Michael H. Riordan

Abstract

This article models a regulatory environment in which the regulated firm possesses better information about demand conditions than does the regulator. The regulator would like to tie prices to the firm's private information in a socially optimal way. To do so, the regulator must induce the firm either truthfully to reveal private information or, equivalently, unilaterally to set socially optimal prices. This is accomplished by assessing lump-sum subsidies or taxes that depend in an appropriate way on the prices announced by the firm. This mechanism can be reinterpreted as a two-part tariff scheme whereby both the service fee and price per unit respond to shifting demand conditions.

Suggested Citation

  • Michael H. Riordan, 1984. "On Delegating Price Authority to a Regulated Firm," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 108-115, Spring.
    • Handle: RePEc:rje:randje:v:15:y:1984:i:spring:p:108-115
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28198421%2915%3A1%3C108%3AODPATA%3E2.0.CO%3B2-A&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Iñaki Aguirre & Arantza Beitia, 2004. "Regulating a Monopolist with Unknown Demand: Costly Public Funds and the Value of Private Information," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(5), pages 693-706, December.
    2. Tracy R. Lewis & David E.M. Sappington, 1988. "Regulating a Monopolist with Unknown Demand and Cost Functions," RAND Journal of Economics, The RAND Corporation, vol. 19(3), pages 438-457, Autumn.
    3. Muhammad Lawal Ahmad Bashar, 1997. "Price Control in an Islamic Economy التسعير في اقتصاد إسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 9(1), pages 29-52, January.
    4. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    5. Salvador Bertomeu, 2019. "On the effects of the financialization of private utilities: lessons from the UK water sector," Working Papers ECARES 2019-29, ULB -- Universite Libre de Bruxelles.
    6. Gregory S. Crawford, 2015. "The economics of television and online video markets," ECON - Working Papers 197, Department of Economics - University of Zurich.
    7. Dan Wang & Peng Hao & Jiancheng Wang, 2023. "Quantities vs. prices: monopoly regulation without transfer under asymmetric demand information," Economics of Governance, Springer, vol. 24(2), pages 177-205, June.
    8. Willington, Manuel & Li Ning, Jorge, 2014. "Regulating a monopoly with universal service obligations: The role of flexible tariff schemes," Telecommunications Policy, Elsevier, vol. 38(1), pages 32-48.
    9. Crawford, Gregory, 2015. "The Economics of Television and Online Video Markets," CEPR Discussion Papers 10676, C.E.P.R. Discussion Papers.
    10. Grafton, R. Quentin & Chu, Long & Kompas, Tom, 2015. "Optimal water tariffs and supply augmentation for cost-of-service regulated water utilities," Utilities Policy, Elsevier, vol. 34(C), pages 54-62.
    11. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    12. Cowan, Simon, 2004. "Optimal risk allocation for regulated monopolies and consumers," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 285-303, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:15:y:1984:i:spring:p:108-115. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.