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Government Intervention in Production and Incentives Theory: A Review of Recent Contributions

Listed author(s):
  • B. Caillaud
  • R. Guesnerie
  • P. Rey
  • J. Tirole

This article reviews the recent literature on regulation under asymmetric information. We first develop the conceptual framework and offer a reminder of the techniques used in the field. Then we apply the framework and techniques to a variety of situations -- with or without commitment. We conclude with a discussion of desirable directions for research.

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Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 19 (1988)
Issue (Month): 1 (Spring)
Pages: 1-26

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Handle: RePEc:rje:randje:v:19:y:1988:i:spring:p:1-26
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References listed on IDEAS
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  1. Guesnerie Roger & Oddou Claude, 1979. "Second best taxation as a game," CEPREMAP Working Papers (Couverture Orange) 7919, CEPREMAP.
  2. Sappington, David, 1983. "Limited liability contracts between principal and agent," Journal of Economic Theory, Elsevier, vol. 29(1), pages 1-21, February.
  3. Paul Milgrom., 1987. "Adverse Selection without Hidden Information," Economics Working Papers 8742, University of California at Berkeley.
  4. Fiorina, Morris P. & Noll, Roger G., "undated". "Voters, Bureaucrats and Legislators: A Rational Choice Perspective on the Growth of Bureaucracy," Working Papers 159, California Institute of Technology, Division of the Humanities and Social Sciences.
  5. Laffont, Jean-Jacques & Tirole, Jean, 1987. "Auctioning Incentive Contracts," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 921-937, October.
  6. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  7. Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, vol. 53(1), pages 69-76, January.
  8. Jean Tirole & Jean-Jaques Laffont, 1987. "Repeated Auctions of Incentive Contracts, Investment and Bidding Parity With an Application to Takeovers," Working papers 463, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. David Sappington, 1983. "Optimal Regulation of a Multiproduct Monopoly with Unknown Technological Capabilities," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 453-463, Autumn.
  10. Loeb, Martin & Magat, Wesley A, 1979. "A Decentralized Method for Utility Regulation," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 399-404, October.
  11. Riordan, Michael H & Sappington, David E M, 1987. "Awarding Monopoly Franchises," American Economic Review, American Economic Association, vol. 77(3), pages 375-387, June.
  12. Bengt Holmstrom & Paul R. Milgrom, 1985. "Aggregation and Linearity in the Provision of Intertemporal Incentives," Cowles Foundation Discussion Papers 742, Cowles Foundation for Research in Economics, Yale University.
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  14. Richard A. Posner, 1974. "Theories of Economic Regulation," NBER Working Papers 0041, National Bureau of Economic Research, Inc.
  15. repec:adr:anecst:y:1986:i:1:p:07 is not listed on IDEAS
  16. Dominique Henriet & Jean-Charles Rochet, 1986. "La logique des systèmes bonus-malus en assurance automobile: une approche théorique," Annals of Economics and Statistics, GENES, issue 1, pages 133-152.
  17. Oliver E. Williamson, 1967. "Hierarchical Control and Optimum Firm Size," Journal of Political Economy, University of Chicago Press, vol. 75, pages 123-123.
  18. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  19. Xavier Freixas & Roger Guesnerie & Jean Tirole, 1985. "Planning under Incomplete Information and the Ratchet Effect," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 173-191.
  20. Maskin, Eric & Riley, John, 1985. "Input versus output incentive schemes," Journal of Public Economics, Elsevier, vol. 28(1), pages 1-23, October.
  21. Picard Pierre, 1986. "On the design of incentive schemes under moral hazard and adverse selection," CEPREMAP Working Papers (Couverture Orange) 8602, CEPREMAP.
  22. R. Preston McAfee & John McMillan, 1987. "Competition for Agency Contracts," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 296-307, Summer.
  23. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  24. Laffont, Jean-Jacques & Tirole, Jean, 1986. "Using Cost Observation to Regulate Firms," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 614-641, June.
  25. Jean-Luc Migué & Gérard Bélanger & William Niskanen, 1974. "Toward a general theory of managerial discretion," Public Choice, Springer, vol. 17(1), pages 27-47, March.
  26. repec:adr:anecst:y:1986:i:1 is not listed on IDEAS
  27. David P. Baron & Roger B. Myerson, 1979. "Regulating a Monopolist with Unknown Costs," Discussion Papers 412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  28. Aumann, Robert J & Kurz, Mordecai, 1977. "Power and Taxes," Econometrica, Econometric Society, vol. 45(5), pages 1137-1161, July.
  29. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-891, December.
  30. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  31. Richard A. Lambert, 1983. "Long-Term Contracts and Moral Hazard," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 441-452, Autumn.
  32. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
  33. Joel S. Demski & David E.M. Sappington & Pablo T. Spiller, 1987. "Managing Supplier Switching," RAND Journal of Economics, The RAND Corporation, vol. 18(1), pages 77-97, Spring.
  34. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
  35. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
  36. William P. Rogerson, 1987. "On the Optimality of Menus of Linear Contracts," Discussion Papers 714, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  37. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  38. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  39. Jean Tirole, 1985. "Procurement and Renegotiation," Working papers 362, Massachusetts Institute of Technology (MIT), Department of Economics.
  40. David P. Baron & David Besanko, 1987. "Commitment and Fairness in a Dynamic Regulatory Relationship," Review of Economic Studies, Oxford University Press, vol. 54(3), pages 413-436.
  41. Engers, Maxim, 1987. "Signalling with Many Signals," Econometrica, Econometric Society, vol. 55(3), pages 663-674, May.
  42. Rubinstein, Ariel & Yaari, Menahem E., 1983. "Repeated insurance contracts and moral hazard," Journal of Economic Theory, Elsevier, vol. 30(1), pages 74-97, June.
  43. Sah, Raaj Kumar & Stiglitz, Joseph E, 1985. "Human Fallibility and Economic Organization," American Economic Review, American Economic Association, vol. 75(2), pages 292-297, May.
  44. Barry J. Nalebuff & Joseph E. Stiglitz, 1983. "Prices and Incentives: Towards a General Theory of Compensation and Competition," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 21-43, Spring.
  45. Radner, Roy, 1985. "Repeated Principal-Agent Games with Discounting," Econometrica, Econometric Society, vol. 53(5), pages 1173-1198, September.
  46. Laffont, Jean-Jacques & Maskin, Eric, 1980. "A Differential Approach to Dominant Strategy Mechanisms," Econometrica, Econometric Society, vol. 48(6), pages 1507-1520, September.
  47. Spence, Michael, 1974. "Competitive and optimal responses to signals: An analysis of efficiency and distribution," Journal of Economic Theory, Elsevier, vol. 7(3), pages 296-332, March.
  48. Quinzii, Martine & Rochet, Jean-Charles, 1985. "Multidimensional signalling," Journal of Mathematical Economics, Elsevier, vol. 14(3), pages 261-284, June.
  49. Partha Dasgupta & Peter Hammond & Eric Maskin, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Oxford University Press, vol. 46(2), pages 185-216.
  50. Picard Pierre & Rey Patrick, 1987. "Incentives in cooperative research and development," CEPREMAP Working Papers (Couverture Orange) 8739, CEPREMAP.
  51. 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.
  52. Barry Nalebuff & David Scharfstein, 1987. "Testing in Models of Asymmetric Information," Review of Economic Studies, Oxford University Press, vol. 54(2), pages 265-277.
  53. Radner, Roy, 1981. "Monitoring Cooperative Agreements in a Repeated Principal-Agent Relationship," Econometrica, Econometric Society, vol. 49(5), pages 1127-1148, September.
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