By Jean-Jacques Laffont
Extra then only a textbook, A idea of Incentives in Procurement and Regulation will consultant economists' study on law for years yet to come. It makes a tough and massive literature of the recent regulatory economics obtainable to the common graduate scholar, whereas providing insights into the theoretical rules and stratagems no longer on hand somewhere else. in line with their pathbreaking paintings within the software of principal-agent idea to questions of law, Laffont and Tirole improve a man-made process, with a specific, although now not specific, specialize in the rules of average monopolies comparable to army contractors, software businesses, and transportation professionals. The book's transparent and logical association starts with an advent that summarizes regulatory practices, recounts the background of proposal that resulted 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 constructed within the introductory bankruptcy continues to be an analogous all through next chapters, making sure either balance and consistency. The concluding bankruptcy discusses very important parts for destiny paintings in regulatory economics. each one bankruptcy opens with a dialogue of the industrial concerns, a casual description of the acceptable version, and an summary of the consequences and instinct. It then develops the formal research, together with adequate factors for people with little education in info economics or online game conception. Bibliographic notes offer a historic standpoint of advancements within the zone and an outline of complementary examine. targeted proofs are given of all significant conclusions, making the ebook priceless as a resource of recent study concepts. there's a huge set of assessment 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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Note that this criticism is internal to the Me concept and does not lead to a fundamental departure from the MC principle. 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.
23 After a growing disenchantment with this form of regulation, attention has focused on alternative and presumably more efficient forms. The 1980s have seen the implementation of several new forms of regulatory mechanisms. 24 In the energy sector, price caps were adopted in 1986 for British Gas, while various forms of incentive regulation were implemented for electric utilities in the United States. S. Interstate Commerce 37 38 Commission's allowing railroads to set prices as they wish, subject in particular to the constraints that total revenues must not exceed total costs over rolling four-year horizons 20.
Thus our definition of procurement is that the principal and the buyer coincide. This distinction uncovers some important differences between procurement and regulation. First, as we noted earlier, the prohibition of transfers from the government to the firm is not a relevant option under procurement because the firm would be unable to recover any of its costs. Second, it may be harder to give incentives to supply nonverifiable quality in procurement. If the quality can be observed by the consumer(s) before purchase (which does not imply that it can be costlessly described ex ante in a contract and verified ex post by a court), the demand for the (search) good is a proxy for its level of quality, and incentives to supply high quality can be provided by rewarding the firm more when sales are high.
A theory of incentives in procurement and regulation by Jean-Jacques Laffont