Prices vs. Quantities and Delegating Price Authority to a Monopolist
This paper examines the desirability of allowing a monopolist to determine the market price. The author finds that none of the regulatory mechanisms previously discussed in the "price versus quantities" literature strictly dominates unregulated, monopoly price-setting. Furthermore, despite suggestions by others, price-setting by a regulated monopolist whose profits coincide with society's net benefits is not always the most desirable means of control. Quantity-setting by such a monopolist may instead be the preferred choice. Combining both into one incentive-compatible mechanism provides the best regulatory scheme and one in which the regulator need not be informed about costs. Copyright 1990 by The Review of Economic Studies Limited.
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Volume (Year): 57 (1990)
Issue (Month): 3 (July)
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