An Incentive-Compatibility Approach to the Problem of Monitoring a Bureau
AbstractAn incentive-compatibility framework for regulating a monopolist with unknown costs is applied to the sponsor’s problem of monitoring a bureau. Following Mueller (1989), the bureau does not make take-it-or-leave-it budget proposals to the sponsor. Rather, the bureau must announce a marginal cost per unit of output to the sponsor. Given that report, the sponsor chooses a price that it will pay to the bureau for each unit of output, and the sponsor chooses the level of output as well. The analysis reveals the price per unit of output that the sponsor must pay to the bureau to maximize social welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 14240.
Date of creation: 1997
Date of revision:
Publication status: Published in Public Finance Review 6.26(1998): pp. 599-610
Bureaucracy; Administrative Processes in Public Organizations; Corruption; Asymmetric and Private Information; Incentive Compatibility; Monitoring;
Find related papers by JEL classification:
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roger B. Myerson, 1977.
"Incentive Compatability and the Bargaining Problem,"
284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
- Prusa, Thomas J., 1990. "An incentive compatible approach to the transfer pricing problem," Journal of International Economics, Elsevier, vol. 28(1-2), pages 155-172, February.
- Breton, Albert & Wintrobe, Ronald, 1975. "The Equilibrium Size of a Budget-maximizing Bureau: A Note on Niskanen's Theory of Bureaucracy," Journal of Political Economy, University of Chicago Press, vol. 83(1), pages 195-207, February.
- Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
- Mark Bagnoli & Ted Bergstrom, 2005.
"Log-concave probability and its applications,"
Springer, vol. 26(2), pages 445-469, 08.
- Carlsen, Fredrik & Haugen, Kjetil, 1994. " Markov Perfect Equilibrium in Multi-period Games between Sponsor and Bureau," Public Choice, Springer, vol. 79(3-4), pages 257-80, June.
- Lewis, Tracy R. & Sappington, David E. M., 1989. "Countervailing incentives in agency problems," Journal of Economic Theory, Elsevier, vol. 49(2), pages 294-313, December.
- Gresik, T.A. & Nelson, D.R., 1991.
"Incentive Compatible Regulation of a Foreign-Owned Subsidiary,"
5-91-3, Pennsylvania State - Department of Economics.
- Gresik, Thomas A. & Nelson, Douglas R., 1994. "Incentive compatible regulation of a foreign-owned subsidiary," Journal of International Economics, Elsevier, vol. 36(3-4), pages 309-331, May.
- Wyckoff, Paul Gary, 1990. " The Simple Analytics of Slack-Maximizing Bureaucracy," Public Choice, Springer, vol. 67(1), pages 35-47, October.
- Chan, Kenneth S. & Mestelman, Stuart, 1988. "Institutions, efficiency and the strategic behaviour of sponsors and bureaus," Journal of Public Economics, Elsevier, vol. 37(1), pages 91-102, October.
- Moene, Karl O., 1986. "Types of bureaucratic interaction," Journal of Public Economics, Elsevier, vol. 29(3), pages 333-345, April.
- Gibbard, Allan, 1973. "Manipulation of Voting Schemes: A General Result," Econometrica, Econometric Society, vol. 41(4), pages 587-601, July.
- Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
- Robert M McNab, 2004. "Base Realignment and Closure: Guiding Principles for Peru," Public Economics 0411001, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.