By Jean-Jacques Laffont
Extra then only a textbook, A idea of Incentives in Procurement and Regulation will advisor economists' study on legislation for years yet to come. It makes a tough and big literature of the hot regulatory economics obtainable to the typical graduate pupil, whereas supplying insights into the theoretical rules and stratagems no longer to be had in different places. in line with their pathbreaking paintings within the software of principal-agent concept to questions of law, Laffont and Tirole advance a man-made method, with a selected, although no longer specific, specialize in the rules of typical monopolies similar to army contractors, software businesses, and transportation specialists. The book's transparent and logical association starts off with an creation that summarizes regulatory practices, recounts the background of proposal that ended in the emergence of the hot 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 continues to be a similar all through next chapters, making sure either balance and consistency. The concluding bankruptcy discusses vital parts for destiny paintings in regulatory economics. each one bankruptcy opens with a dialogue of the commercial concerns, an off-the-cuff description of the appropriate version, and an summary of the implications and instinct. It then develops the formal research, together with enough factors for people with little education in details economics or online game thought. Bibliographic notes offer a historic point of view of advancements within the zone and an outline of complementary study. distinct proofs are given of all significant conclusions, making the ebook priceless as a resource of recent learn concepts. there's a huge set of overview 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 clinical Director on the Institut d'Economié Industrielle.
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Extra info for A theory of incentives in procurement and regulation
3% for the first regulatory period of British Telecom). British Gas, which has been subject to PC regulation since 1986, had until recently an RPI - X + Y formula for domestic users, where the Y term allows a full pass through of the cost of gas supplies. In the United States PC regulation is used for long-distance telecommunication services (the FCC has applied it to AT&T since 1989) and to intrastate telecommunication services (for the state regulation of local exchange carriers since 1991).
In particular, even though price exceeds marginal cost, pricing is unrelated to average cost pricing, since price is independent of the fixed cost. Criticism 2 Cease and the social value of maintaining production. 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.
There are two common polar cases of such linear schemes: 1. The cost-plus-fixed-fee or cost-plus contract (b = 0) The firm does not bear any of its cost. The cost-plus contract is an extremely low-powered incentive scheme. 2. The fixed-price contract (b = 1). The firm is residual claimant for its cost savings. The government does not de facto reimburse any of the costs; it pays only a fixed fee. The fixed-price contract is an extremely high-powered incentive scheme. " Real-world contracts are often linear, but some have 10.
A theory of incentives in procurement and regulation by Jean-Jacques Laffont