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Optimal Regulation of Research and Development under Imperfect Information

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  • David Sappington

Abstract

The optimal regulatory strategy to promote research and development aimed at cost reduction is derived for an environment in which the firm's information about the technology of cost reduction, although initially imperfect, is better than that of the regulator. The manner in which the optimal regulatory strategy varies with changes in the informational environment is also described.

Suggested Citation

  • David Sappington, 1982. "Optimal Regulation of Research and Development under Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 354-368, Autumn.
  • Handle: RePEc:rje:bellje:v:13:y:1982:i:autumn:p:354-368
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    Cited by:

    1. Saglam, Ismail, 2017. "The Effect of Observability on the Noncontractible Investment of a Regulated Firm," MPRA Paper 75963, University Library of Munich, Germany.
    2. Linda Cohen & Amihai Glazer, 2014. "Forward Markets to Spur Innovation," Working Papers 131405, University of California-Irvine, Department of Economics.
    3. B. Caillaud & R. Guesnerie & P. Rey & J. Tirole, 1988. "Government Intervention in Production and Incentives Theory: A Review of Recent Contributions," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 1-26, Spring.
    4. Suzanne Scotchmer., 1999. "Delegating Investment in a Common-Value Project," Economics Working Papers E99-266, University of California at Berkeley.
    5. Isabelle Brocas, 2005. "Multistage Contracting with Applications to R&D and Insurance Policies," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(2), pages 317-346, May.
    6. de Laat, Eric A. A., 1997. "Patents or prizes: Monopolistic R&D and asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 15(3), pages 369-390, May.
    7. Drew Fudenberg, 2015. "Tirole's Industrial Regulation and Organization Legacy in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(3), pages 771-800, July.
    8. Naoto Aoyama & Emilson C.D. Silva, 2017. "Asymmetric Innovation Agreements under Environmental Regulation," CESifo Working Paper Series 6782, CESifo Group Munich.
    9. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    10. Miravete, Eugenio J., 2011. "Convolution and composition of totally positive random variables in economics," Journal of Mathematical Economics, Elsevier, vol. 47(4-5), pages 479-490.
    11. Andersson, Tommy, 2004. "Essays on Nonlinear Pricing and Welfare," MPRA Paper 59446, University Library of Munich, Germany.
    12. Saglam, Ismail, 2014. "Research and Development of an Optimally Regulated Monopolist with Unknown Costs," MPRA Paper 60245, University Library of Munich, Germany.
    13. Yu Chen & David Michael Rietzke, 2016. "Push or pull? Performance pay, incentives, and information," Working Papers 127987900, Lancaster University Management School, Economics Department.
    14. Rajeev K. Goel, 1999. "On contracting for uncertain R&D," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(2), pages 99-106.
    15. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.

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