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Multiproduct Price Regulation under Asymmetric Information

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  • Armstrong, Mark
  • Vickers, John

Abstract

We discuss the regulation of a multiproduct monopolist when the firm has private information about cost or demand conditions. The regulator offers the firm a set of prices from which to choose. When there is private information only about costs, the firm should always have a degree of discretion over its pricing policy. When uncertainty concerns demand, whether discretion is desirable depends on how demand elasticities vary with the scale of demands. If a positive demand shock is associated with a reduction in the market elasticity, discretion is good for overall welfare; otherwise it is not. Copyright 2000 by Blackwell Publishing Ltd

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  • Armstrong, Mark & Vickers, John, 2000. "Multiproduct Price Regulation under Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 137-160, June.
  • Handle: RePEc:bla:jindec:v:48:y:2000:i:2:p:137-60
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    Citations

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    Cited by:

    1. Rob Aalbers & Viktoria Kocsis & Victoria Shestalova, 2011. "Optimal regulation under unknown supply of distributed generation," CPB Discussion Paper 192, CPB Netherlands Bureau for Economic Policy Analysis.
    2. Alberto Iozzi & Roberta Sestini & Edilio Valentini, 2006. "Pricing Discretion and Price Regulation in Competitive Industries," Journal of Regulatory Economics, Springer, vol. 29(2), pages 151-165, March.
    3. Boggio, Margherita, 2011. "From Reluctant Privatization to Municipal Capitalism: an Overview on Ownership, Political Connections and Decentralization," MPRA Paper 46232, University Library of Munich, Germany.
    4. Giuseppe Coco & Claudio De Vincenti, 2002. "Can regulation increase firm's efficiency?," Working Papers 60, University of Rome La Sapienza, Department of Public Economics.
    5. María Angeles García Valiñas, 2004. "Eficiencia y equidad en el diseño de precios óptimos para bienes y servicios públicos," Hacienda Pública Española, IEF, vol. 168(1), pages 95-119, march.
    6. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
    7. Pierre-Henri MORAND & Lionel THOMAS, 2006. "Efficient procurement with quality concerns," Discussion Papers (REL - Recherches Economiques de Louvain) 2006022, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    8. Cowan, Simon, 2004. "Optimal risk allocation for regulated monopolies and consumers," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 285-303, January.
    9. Christian Gollier and Jean Tirole, 2015. "Negotiating effective institutions against climate change," Economics of Energy & Environmental Policy, International Association for Energy Economics, vol. 0(Number 2).

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