公共经济学4 管制2.pdfVIP

Public Sector Economics — MSc Econ 2011 4. Regulation II Paul Schweinzer November 17, 2011. 1 / 14 Public Sector Economics: Lecture 4 Demand uncertainty First-best Second-best Summary Regulation with unknown demand: Reading The canonical application under incomplete information on demand is the price regulation of a monopolist in the electricity or telecommunications industries. A current application is ‘last mile’ broadband provision. The reading for this second part of the regulation block comprises ? Lewis, T.R. and D. Sappington 1988 “Regulating a Monopolist with Unknown Demand,” American Economic Review, 78 5 , 986–98. ? Armstrong, M. 1999 “Optimal Regulation with Unknown Demand and Cost Functions,” Journal of Economic Theory, 84 2 , 196–215. ? Segal, I. 2003 “Optimal Pricing Mechanisms with Unknown Demand,” American Economic Review, 93 3 , 509–29. 2 / 14 Public Sector Economics: Lecture 4 Demand uncertainty First-best Second-best Summary The model Consider the following model due to Lewis Sappington 1988 : ? The agent’s output q ∈ [0, ∞ is unobservable. Output q is produced at cost c q with ′ ′′ c q 0, c q 0. ? Price p ∈ [0, pˉ is contractible and set by the principal. ? Consumer demand D θ q p, θ depends on the consumer type θ ∈ [θL, θH] with density g θ interpreted as lowest valuation θL and highest valuation θH . ? Net consumer welfare from the provided quantity q at p is S p, θ pˉ q ?p, θ dp?, with dS ?q p, θ . p dp ? There is a type-dependent, lump-sum transfer T θ from the principal to the agent. The principal speci?es a set of contracts T θ , p θ . 3 / 14 Public Sector Economics: Lecture 4 Demand uncertainty First-best Second-best Summary First-best: Participation The ?rm’s pro?t π from selling to type θ-consumers is given by π θ p θ q p θ , θ ? c q p θ , θ + T θ ≥ 0. PC θ As usual, the rhs inequality is the participation constraint with zero-normalised outside option. For known consumer tastes θ , the reg