A theory of incentives in procurement and regulation by Jean-Jacques Laffont

By Jean-Jacques Laffont

Extra then only a textbook, A thought of Incentives in Procurement and Regulation will advisor economists' examine on law for future years. It makes a tricky and massive literature of the recent regulatory economics available to the common graduate pupil, whereas delivering insights into the theoretical rules and stratagems now not to be had in different places. in response to their pathbreaking paintings within the program of principal-agent idea to questions of law, Laffont and Tirole advance a man-made procedure, with a specific, even though no longer particular, concentrate on the law of typical monopolies resembling army contractors, application businesses, and transportation professionals. The book's transparent and logical association starts with an advent that summarizes regulatory practices, recounts the heritage of suggestion that resulted in the emergence of the recent regulatory economics, units up the elemental constitution of the version, and previews the commercial 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 parts for destiny paintings in regulatory economics. every one bankruptcy opens with a dialogue of the commercial matters, a casual description of the acceptable version, and an summary of the consequences and instinct. It then develops the formal research, together with adequate motives for people with little education in details economics or video game idea. Bibliographic notes offer a historic viewpoint of advancements within the zone and an outline of complementary study. distinct proofs are given of all significant conclusions, making the ebook beneficial as a resource of contemporary learn innovations. there's a huge set of evaluate difficulties on the finish of the booklet. 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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The alternative to experimentation of course is to order demand surveys. The advantage of surveys is that they do not involve large price distortions. However, there are two kinds of costs to consider with relation to surveys: First, there is the administrative cost of conducting the survey. Second, there is the potential cost of the survey's design being manipulated if the agency is captured by interest groups (the firm or the customers) having a stake in the activity being maintained through subsidies from the government.

So the Government would estimate whether a consumer would be willing to pay, and if he is willing to pay, it does not charge him. I found this a very odd feature. But I do not see how it would be possible for any government, or anyone else for that matter, to make accurate estimates at low cost and without knowledge of what would have happened if consumers had been required to pay the cost. The way we discover whether people arc willing to pay something is to ask them to pay it, and if we do not have such a system, it becomes extremely difficult to make estimates of whether they would be willing to pay.

To compute the real cost incurred by a firm, the firm's cost and revenue are multiplied by 1 + λ. To take an example, suppose that the firm produces a single output q at cost where α is a fixed cost. ) denote the inverse demand function. Optimal pricing in the presence of a shadow cost of public funds is given by Let denote the elasticity of demand. Brief computations yield Pricing is still closely related to marginal cost, but it also depends on the elasticity of demand. , to monetary considerations weighting infinitely more than the consumer net surplus) obtains.

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