Regulating without Cost Information: The Incremental Surplus Subsidy Scheme
The authors propose a regulatory mechanism, called the incremental surplus subsidy (ISS) scheme, that can be implemented even when the regulato r has no knowledge of the monopolist's cost structure. The regulator need only share the firm's knowledge of demand (which may be imperfec t) and be able to observe (with a lag) the firm's expenditures. The I SS scheme induces the firm to set marginal cost prices, to minimize p roduction costs, and to undertake efficient investment levels. It als o severely limits the firm's rents, and eliminates them altogether if the firm's discount rate is known. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
Volume (Year): 29 (1988)
Issue (Month): 2 (May)
|Contact details of provider:|| Postal: |
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:29:y:1988:i:2:p:297-306. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or ()
If references are entirely missing, you can add them using this form.