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Regulating a Monopolist with unknown costs and unknown quality capacity

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Author Info
Blackorby, Charles (Department of Economics, University of Warwick)
Szalay, Dezsö (Department of Economics, University of Warwick)

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Abstract

We study the regulation of a firm with unknown demand and cost information. In contrast to previous studies, we assume demand is influenced by a quality choice, and the firm has private information about its quality capacity in addition to its cost. Under natural conditions, asymmetric information about the quality capacity is irrelevant. The optimal pricing is weakly above marginal costs for all types and no type is excluded.

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File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/publications/twerp_858.pdf
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Publisher Info
Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 858.

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Length: 42 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:wrk:warwec:858

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Related research
Keywords: Asymmetric Information ; Multi-dimensional Screening ; Regulation;

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Find related papers by JEL classification:
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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  1. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, vol. 64(1), pages 51-75, January. [Downloadable!] (restricted)
  2. Beaudry, Paul & Blackorby, Charles, 2006. "Taxes and Employment Subsidies in Optimal Redistribution Programs," The Warwick Economics Research Paper Series (TWERPS) 766, University of Warwick, Department of Economics. [Downloadable!]
    Other versions:
  3. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Blackwell Publishing, vol. 65(1), pages 1-21, January. [Downloadable!] (restricted)
  4. Mirrlees, James A, 1997. "Information and Incentives: The Economics of Carrots and Sticks," Economic Journal, Royal Economic Society, vol. 107(444), pages 1311-29, September. [Downloadable!] (restricted)
  5. Armstrong, Mark, 1999. "Optimal Regulation with Unknown Demand and Cost Functions," Journal of Economic Theory, Elsevier, vol. 84(2), pages 196-215, February. [Downloadable!] (restricted)
  6. Beaudry, Paul & Blackorby, Charles & Szalay, Dezso, 2006. "Taxes and Employment Subsidies in Optimal Redistribution Programs (Revised Version)," The Warwick Economics Research Paper Series (TWERPS) 779, University of Warwick, Department of Economics. [Downloadable!]
  7. Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, vol. 55(2), pages 441-67, March. [Downloadable!] (restricted)
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  8. McAfee, R. Preston & McMillan, John, 1988. "Multidimensional incentive compatibility and mechanism design," Journal of Economic Theory, Elsevier, vol. 46(2), pages 335-354, December. [Downloadable!] (restricted)
  9. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, vol. 43(4-6), pages 959-979, April. [Downloadable!] (restricted)
  10. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, vol. 92(2), pages 198-233, June. [Downloadable!] (restricted)
  11. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1999. "Multidimensional Mechanism Design for Auctions with Externalities," Journal of Economic Theory, Elsevier, vol. 85(2), pages 258-293, April. [Downloadable!] (restricted)
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