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Regulating a Monopolist with unknown costs and unknown quality capacity

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  • Blackorby, Charles

    (Department of Economics, University of Warwick)

  • Szalay, Dezsö

    (Department of Economics, University of Warwick)

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/2008/twerp_858.pdf
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Bibliographic 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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Keywords: Asymmetric Information ; Multi-dimensional Screening ; Regulation;

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  1. Mirrlees, James A, 1997. "Information and Incentives: The Economics of Carrots and Sticks," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 107(444), pages 1311-29, September.
  2. Paul Beaudry & Charles Blackorby & Dezs� Szalay, 2009. "Taxes and Employment Subsidies in Optimal Redistribution Programs," American Economic Review, American Economic Association, American Economic Association, vol. 99(1), pages 216-42, March.
  3. Matthews, Steven & Moore, John, 1987. "Monopoly Provision of Quality and Warranties: An Exploration in the Theory of Multidimensional Screening," Econometrica, Econometric Society, Econometric Society, vol. 55(2), pages 441-67, March.
  4. Jehiel, Phillipe & Moldovanu, Benny & Stacchetti, E., 1997. "Multidimensional Mechanism Design for Auctions with Externalities," Sonderforschungsbereich 504 Publications, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim 97-04, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  5. Beaudry, Paul & Blackorby, Charles & Szalay, Dezso, 2006. "Taxes and Employment Subsidies in Optimal Redistribution Programs (Revised Version)," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 779, University of Warwick, Department of Economics.
  6. Armstrong, Mark & Rochet, Jean-Charles, 1999. "Multi-dimensional screening:: A user's guide," European Economic Review, Elsevier, Elsevier, vol. 43(4-6), pages 959-979, April.
  7. Armstrong, Mark, 1996. "Multiproduct Nonlinear Pricing," Econometrica, Econometric Society, Econometric Society, vol. 64(1), pages 51-75, January.
  8. Che, Yeon-Koo & Gale, Ian, 1998. "Standard Auctions with Financially Constrained Bidders," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(1), pages 1-21, January.
  9. McAfee, R. Preston & McMillan, John, 1988. "Multidimensional incentive compatibility and mechanism design," Journal of Economic Theory, Elsevier, Elsevier, vol. 46(2), pages 335-354, December.
  10. Garud Iyengar & Anuj Kumar, 2008. "Optimal procurement mechanisms for divisible goods with capacitated suppliers," Review of Economic Design, Springer, Springer, vol. 12(2), pages 129-154, June.
  11. Armstrong, Mark, 1999. "Optimal Regulation with Unknown Demand and Cost Functions," Journal of Economic Theory, Elsevier, Elsevier, vol. 84(2), pages 196-215, February.
  12. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 026272040x, December.
  13. Che, Yeon-Koo & Gale, Ian, 2000. "The Optimal Mechanism for Selling to a Budget-Constrained Buyer," Journal of Economic Theory, Elsevier, Elsevier, vol. 92(2), pages 198-233, June.
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