A Theory of Incentives in Procurement and Regulation / Edition 1

A Theory of Incentives in Procurement and Regulation / Edition 1

by Jean-Jacques Laffont, Jean Tirole
     
 

ISBN-10: 0262121743

ISBN-13: 9780262121743

Pub. Date: 03/10/1993

Publisher: MIT Press

More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based

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Overview

More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based on their pathbreaking work in the application of principal-agent theory to questions of regulation, Laffont and Tirole develop a synthetic approach, with a particular,though not exclusive, focus on the regulation of natural monopolies such as military contractors, utility companies, and transportation authorities.

The book's clear and logical organization begins with an introduction that summarizes regulatory practices, recounts the history of thought that led to the emergence of the new regulatory economics, sets up the basic structure of the model, and previews the economic questions tackled in the next seventeen chapters. The structure of the model developed in the introductory chapter remains the same throughout subsequent chapters, ensuring both stability and consistency. The concluding chapter discusses important areas for future work in regulatory economics. Each chapter opens with a discussion of the economic issues,an informal description of the applicable model, and an overview of the results and intuition. It then develops the formal analysis, including sufficient explanations for those with little training in information economics or game theory.

Bibliographic notes provide a historical perspective of developments in the area and a description of complementary research. Detailed proofs are given of all major conclusions, making the book valuable as a source of modern research techniques.

There is a large set of review problems at the end of the book.

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Product Details

ISBN-13:
9780262121743
Publisher:
MIT Press
Publication date:
03/10/1993
Edition description:
New Edition
Pages:
731
Product dimensions:
7.40(w) x 9.90(h) x 1.80(d)
Age Range:
18 Years

Table of Contents

FOREWORD
ACKOWLEDGMENTS
INTRODUCTION
1 The Regulatory Environments and Institutions
2 Commonly Used Incentive Schemes
3 Received Theory and the Agenda for the New Regulatory
Economics
4 Methodology and Overview of the Book
I Price and RateofReturn Regulation
1 COSTREIMBURSEMENT RULES
1.1 Some Background
1.2 The Model
1.3 The TwoType Case
1.4 Continuum of Types
1.5 The Main Economic Conclusions
1.6 Implementation: Relevance and Informational Requirements of
Menus
1.7 Using Yardstick "Competition" to Reduce Informational
Asymmetries
1.8 Adding Investment to the Model
1.9 Investment under Noncommitment
1.10 Multiperiod Relationship under Commitment: False Dynamics
1.11 Risk Aversion
Bibliographic Notes
AppendiXes
References
2 PRICING BY A SINGLEPRODUCT FIRM WITH AND WITHOUT
BUDGET BALANCE
2.1 Some Background
2.2 The Model
2.3 The TwoType Case
2.4 Continuum of Types
2.5 Delegation of Pricing to the Firm
2.6 TwoPart Tariffs in the Absence of Government Transfer
2.7 Linear Pricing in the Absence of Government Transfer
2.8 Concluding Remarks
Bibliographic Notes
References
3 PRICING AND INCENTIVES IN A MULTIPRODUCT FIRM
3.1 Some Background
3.2 Optimal Regulation
3.3 ThirdDegree Price Discrimination
3.4 SecondDegree Price Discrimination
3.5 Verifiable Quality
3.6 The IncentivePricing Dichotomy
3.7 Multidimensional Effort and Characteristics
3.8 Is Subcost Observation Useful?
3.9 General Equilibrium Analysis: Foundations of the Shadow Cost
of Public Funds and TaXation by Regulation
3.10 Concluding Remarks
BibliographicNotes
AppendiXes
References
4 REGULATION OF QUALITY
4.1 Some Background
4.2 The Model with a Search Good
4.3 Optimal Regulation under Asymmetric Information
4.4 Implementation of the Optimal Regulatory Mechanism
4.5 Concern for Quality and the Power of Incentive Schemes
4.6 Reputation Incentives for an EXperience Good
4.7 Concluding Remarks
Bibliographic Notes
AppendiXes
References
II Product Market Competition
5 COMPETITIVE RAMSEY FORMULAS AND ACCESS PRICING
5.1 Some Background
5.2 Pricing and Competition
5.3 Access Pricing: Pricing in the Absence of Incentive Correction
5.4 Access Pricing and Incentives
5.5 Concluding Remarks
Bibliographic Notes
AppendiXes
References
6 BYPASS AND CREAM SKIMMING
6.1 Some Background
6.2 The Model
6.3 Optimal Pricing Rules and Optimal Incentive Schemes
6.4 Bypass and Cream Skimming
6.5 Some Further Considerations about Bypass: Redistribution and
Budget Constraint
6.6 Concluding Remarks
Bibliographic Notes
AppendiXes
References
III Bidding for Natural Monopoly
7 AUCTIONING INCENTIVE CONTRACTS
7.1 Some Background
7.2 The Model
7.3 The Optimal Bayesian Auction in the TwoFirm, TwoType Case
7.4 The Optimal Bayesian Auction in the Continuum Case
7.5 Implementation by a Dominant Strategy Auction
7.6 Optimality of Linear Contracts
7.7 Auctions in Regulation
7.8 Concluding Remarks
Bibliographic Notes
AppendiXes
References
8 REPEATED AUCTIONS OF INCENTIVE CONTRACTS, INVESTMENT,
AND BIDDING PARITY
8.1 Some Background
8.2 The Model
8.3 Optimal Regulation under Asymmetric Information
8.4 Learning by Doing
8.5 Assessment of the Model
8.6 Transferable Investment
8.7 Concluding Remarks
Bibliographic Notes
AppendiXes
References
IV The Dynamics of Regulation
9 DYNAMICS WITHOUT COMMITMENT AND THE RATCHET EFFECT
9.1 Some Background
9.2 The Model
9.3 Ratcheting and Pooling in the Continuum Case
9.4 The TwoType Case
9.5 Concluding Remarks
Bibliographic Notes
AppendiXes
References
10 COMMITMENT AND RENEGOTIATION
10.1 Some Background
10.2 The Model
10.3 RenegotiationProof SecondPeriod Contracts
10.4 Characterization of the Optimal Contract
10.5 How Much Pooling?
10.6 Continuum of Types
10.7 Commitment, Renegotiation, and Noncommitment
Bibliographic Notes
AppendiXes
References
V The Politics of Regulation
11 REGULATORY CAPTURE
11.1 Some Background
11.2 The Model
11.3 CollusionFree Regulation
11.4 Producer Protection
11.5 Multiple Interest Groups
11.6 Shutdown of the Regulated Firm
11.7 A Political Theory of Crosssubsidization
11.8 Concluding Remarks
Bibliographic
AppendiXes
References
12 COST PADDING, AUDITING, AND COLLUSION
12.1 Some Background
12.2 The Benchmark (No Cost Padding, No Auditing)
12.3 Audit of Cost Padding
12.4 Monitoring of Effort
Bibliographic Notes
AppendiXes
References
13 CARTELIZATION BY REGULATION
13.1 Some Background
13.2 The Model
13.3 Benevolent Agency and Incomplete Information about the
Incumbent's Technology
13.4 Cartelization
13.5 Pro and Anticompetition Agencies
AppendiXes
References
14 AUCTION DESIGN AND FAVORITISM
14.1 Some Background
14.2 The Model
14.3 Optimal Auction with a Benevolent Agency
14.4 Collusion and Soft Information
14.5 Asymmetric Collusion and Hard Information
14.6 Symmetric Collusion and Hard Information
14.7 Concluding Remarks
AppendiXes
References
VI Regulatory Institutions
15 REGULATORY INSTRUMENTS, HEARINGS, AND INTEREST
GROUP MONITORING
15.1 Welfare Foundations of Institutions
15.2 The Model
15.3 The Solution
15.4 Choice of Watchdog
15.5 Concluding Remarks
AppendiXes
References
16 COMMITMENT AND POLITICAL ACCOUNTABILITY
16.1 Some Background
16.2 Shortlived Regulators and the Optimal Constitution
16.3 Shortlived Regulators and Complete Contracting
16.4 Elections, Career Concerns, and Commitment
16.5 Concluding Remarks
Bibliographic Notes
References
17 PRIVATIZATION AND INCENTIVES
17.1 Some Background
17.2 The Model
17.3 Optimal Regulation with Public Ownership
17.4 Optimal Regulation of a Private Firm
17.5 Comparison of Ownership Structures
17.6 Concluding Remarks
Bibliographic Notes
AppendiXes
References
CONCLUSION
REVIEW EXERCISES
INDEX

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