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By Jean-Jacques Laffont

Extra then only a textbook, A thought of Incentives in Procurement and Regulation will consultant economists' examine on legislation for years yet to come. It makes a tough and massive literature of the hot regulatory economics available to the typical graduate pupil, whereas providing insights into the theoretical rules and stratagems no longer on hand in other places. in response to their pathbreaking paintings within the software of principal-agent idea to questions of legislation, Laffont and Tirole improve an artificial strategy, with a specific, even though no longer unique, specialise in the rules of usual monopolies resembling army contractors, application businesses, and transportation professionals. The book's transparent and logical association starts off with an creation that summarizes regulatory practices, recounts the background of concept that ended in the emergence of the recent regulatory economics, units up the fundamental constitution of the version, and previews the industrial questions tackled within the subsequent seventeen chapters. The constitution of the version built within the introductory bankruptcy is still an identical all through next chapters, making sure either balance and consistency. The concluding bankruptcy discusses vital components for destiny paintings in regulatory economics. every one bankruptcy opens with a dialogue of the commercial matters, an off-the-cuff description of the acceptable version, and an outline of the implications and instinct. It then develops the formal research, together with enough motives for people with little education in details economics or video game conception. Bibliographic notes offer a historic standpoint of advancements within the zone and an outline of complementary learn. specified proofs are given of all significant conclusions, making the booklet worthwhile as a resource of recent learn options. there's a huge set of evaluate difficulties on the finish of the e-book. Jean-Jacques Laffont is Professor of Economics at Université des Sciences Sociales in Toulouse the place Jean Tirole is medical Director on the Institut d'Economié Industrielle.

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Indeed, with an infinite regulatory lag, COS regulation would have a fixed-price nature. In practice regulatory reviews are endogenous and can usually be initiated by the regulated firm or the regulatory agency. Quite often a firm facing rising costs of inputs applies to the agency for permission to raise its price. A hearing is held and information is collected on cost and revenue for a "test period" of one year, say. Rate filings, regulatory hearings, and decision making by agencies are lengthy.

A more fundamental criticism of MC pricing, due to Cease (1945, 1946; see also Wilson 1945) applies to a firm or a product whose existence is not a forgone conclusion. It may be an existing bus or railway line that runs a deficit and is a candidate for closure or a new product whose value added relative to the existing substitutes is being discussed. The basic idea is that unless the activity at least breaks even, MC pricing does not reveal 43. 9 and Atkinson and Stiglitz (1980). page_24 If you like this book, buy it!

To this end it is useful to briefly recall the main features of current schemes, for practice will guide modeling choices throughout this book: The schemes reveal feasible regulatory instruments, and together with regulatory institutions, they suggest the main problems confronted by regulation. This section will be useful to those who lack familiarity with regulatory institutions. Current incentive schemes can be analyzed along two dividing lines. The first is whether the government is allowed to subsidize (or tax) regulated firms, that is, whether regulated firms can receive public funds and thus not cover all their costs through direct charges to private customers.

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