Optimal Industrial Policy
AbstractThe 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.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1999004.
Date of creation: 01 Jan 1999
Date of revision:
Find related papers by JEL classification:
- D43 - Microeconomics - - Market Structure and Pricing - - - 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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- G. Dionne & R. Gagné, 2000.
"Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance,"
THEMA Working Papers
2000-06, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Dionne, Georges & Gagne, Robert, 2002. " Replacement Cost Endorsement and Opportunistic Fraud in Automobile Insurance," Journal of Risk and Uncertainty, Springer, Springer, vol. 24(3), pages 213-30, May.
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