Dynamic Regulation of Quality
AbstractWe develop a dynamic regulation model of quality provision where maintenance efforts and quality shocks have a durable impact. When the regulator contracts with a sequence of agents, asymmetric information can lead to overprovision of quality, reflecting a dynamic rent extraction effect. When the regulator contracts with a single agent, the efficiency of their relationship depends on the regulator's ability to transfer rents across periods. Hiring a single agent with unlimited liability is socially preferable to hiring a sequence of agents, even when no commitment is feasible. By contrast, shorter franchises are socially preferable if the agent has limited liability.
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Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 397.
Date of creation: Jul 2007
Date of revision:
Publication status: Published in The RAND Journal of Economics, vol.�42, n°2, Summer 2011, p.�246-265.
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Other versions of this item:
- StÃ©phane Auray & Thomas Mariotti & Fabien Moizeau, 2011. "Dynamic regulation of quality," Working Papers 245736, Institut National de la Recherche Agronomique, France.
- Stéphane Auray & Thomas Mariotti & Fabien Moizeau, 2008. "Dynamic Regulation of Quality," Cahiers de recherche 08-11, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-24 (All new papers)
- NEP-MIC-2006-06-24 (Microeconomics)
- NEP-REG-2006-06-24 (Regulation)
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