IDEAS home Printed from https://ideas.repec.org/p/por/fepwps/337.html
   My bibliography  Save this paper

Regulating a monopolist with unknown bureaucratic tendencies

Author

Listed:
  • Ana Pinto Borges

    () (Faculdade de Economia, Universidade do Porto)

  • João Correia-da-Silva

    () (CEF.UP and Faculdade de Economia, Universidade do Porto)

  • Didier Laussel

    () (GREQAM, Université de la Méditerranée)

Abstract

We determine the optimal contract for the regulation of a bureaucratic firm in the case in which the bureaucratic bias is firm's private information. We find that output is distorted upward when the bureaucratic bias is low, downward when it is high, and equals a reference output when it is intermediate (in this case, the participation constraint is binding). We also determine an endogenous reference output (equal to the expected output, which depends on the reference output), and find that the response of output to cost is null in the short-run (in which the reference output is fixed) whenever the managers' types are in the intermediate range and negative in the long-run (after the adjustment of the reference output to equal expected output).

Suggested Citation

  • Ana Pinto Borges & João Correia-da-Silva & Didier Laussel, 2009. "Regulating a monopolist with unknown bureaucratic tendencies," FEP Working Papers 337, Universidade do Porto, Faculdade de Economia do Porto.
  • Handle: RePEc:por:fepwps:337
    as

    Download full text from publisher

    File URL: http://www.fep.up.pt/investigacao/workingpapers/09.10.20_wp337.pdf
    Download Restriction: no

    More about this item

    Keywords

    Procurement; Regulation; Adverse selection; Bureaucracy; Reservation utility;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:por:fepwps:337. 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: (). General contact details of provider: http://edirc.repec.org/data/fepuppt.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.