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Optimal Industrial Policy

Author

Listed:
  • Auriol, Emmanuelle

    (Université de Toulouse I, ARQADE and IDEI)

  • Picard, Pierre M.

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES); FUNDP, Namur)

Abstract

The paper derives optimal industrial policy for natural monopoly. It compares the benefit and cost of privatization and regulation taking into account the problems of asymmetric information and of soft budget constraint for regulated firms. It helps to disantangle the notion of 'privatization' and the notion of 'deregulation'. It shows that unless some change occurs in demand or in technology, natural monopolies remain natural monopolies. Whether they should be under public or private ownership depends crucially on the government budget constraint. The optimal policy involves private structure when the opportunity cost of public funds is large.

Suggested Citation

  • Auriol, Emmanuelle & Picard, Pierre M., 1999. "Optimal Industrial Policy," LIDAM Discussion Papers IRES 1999004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1999004
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    Cited by:

    1. Auriol, Emmanuelle & Schilizzi, Steven, 2000. "Quality Signaling through Certification," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123598, Australian Agricultural and Resource Economics Society.
    2. Dionne, Georges & Gagne, Robert, 2002. "Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance," Journal of Risk and Uncertainty, Springer, vol. 24(3), pages 213-230, May.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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