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Regulation under Financial Constraints

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  • Axel Gautier

Abstract

This article studies a simple procurement problem (Laffont and Tirole,1993) where the regulator faces a cash-in-advance constraint. The introduction of such a constraint not only reduces the amount of public good provided but also limits the instruments available to the regulator. The wealth constraint could change the optimal regulatory contract from a two-part tariff, where the quantities produced depend on the firm's cost, to a less efficient fixed fee where the firm produces the same quantity whatever its cost. Copyright CIRIEC, 2004.

Suggested Citation

  • Axel Gautier, 2004. "Regulation under Financial Constraints," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 75(4), pages 645-656, December.
  • Handle: RePEc:bla:annpce:v:75:y:2004:i:4:p:645-656
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    References listed on IDEAS

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    1. Susan Rose-Ackerman, 1996. "Altruism, Nonprofits, and Economic Theory," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 701-728, June.
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    9. Stark, Oded, 1993. "Nonmarket transfers and altruism," European Economic Review, Elsevier, vol. 37(7), pages 1413-1424, October.
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    Citations

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    Cited by:

    1. Anthon, Signe & Bogetoft, Peter & Thorsen, Bo Jellesmark, 2007. "Socially optimal procurement with tight budgets and rationing," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1625-1642, August.
    2. Tigran Melkonyan & Michael H. Taylor, 2013. "Regulatory Policy Design for Agroecosystem Management on Public Rangelands," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(3), pages 606-627.
    3. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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