By Jean-Jacques Laffont
Extra then only a textbook, A conception of Incentives in Procurement and Regulation will consultant economists' learn on rules for future years. It makes a tough and massive literature of the hot regulatory economics available to the common graduate pupil, whereas supplying insights into the theoretical principles and stratagems now not on hand somewhere else. in response to their pathbreaking paintings within the program of principal-agent idea to questions of law, Laffont and Tirole enhance a man-made technique, with a specific, even though now not unique, specialize in the law of normal monopolies corresponding to army contractors, software businesses, and transportation professionals. The book's transparent and logical association starts with an creation that summarizes regulatory practices, recounts the background of idea that resulted 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 an analogous all through next chapters, making sure either balance and consistency. The concluding bankruptcy discusses very important components for destiny paintings in regulatory economics. each one bankruptcy opens with a dialogue of the commercial concerns, an off-the-cuff description of the acceptable version, and an outline of the consequences and instinct. It then develops the formal research, together with enough causes for people with little education in info economics or online game thought. Bibliographic notes supply a historic point of view of advancements within the quarter and an outline of complementary examine. particular proofs are given of all significant conclusions, making the booklet important as a resource of contemporary examine suggestions. 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
Page_24 If you like this book, buy it! 44 Coase thus argued that advocates of MC pricing assume that the government should decide for the consumers whether they would be willing to pay a sum of money that would cover the total cost and then, if they are willing to pay, not charge them the full cost. 45 Coase's point that a consumer should pay an amount equal to the total cost of supplying him is illustrated in figure 4, for cost function C(q) = cq + α. In the figure production, which should be priced at mar44.
The economist can instruct the regulator to offer the firm the optimal regulatory scheme conditional on the regulator's information. But, unlike a simple rule, an informationally demanding rule is not always robust to the perversion of regulatory behavior. The agency may not exert enough effort to collect information about the industry, and it may use its information strategically to reach its own goals or to collude with the industry or other interest groups. If the optimal rule is not simple and if the agency is not benevolent and cannot be perfectly monitored, the model must be enriched to describe the agency's incentives and behavior.
Such schemes are orthogonal to the efficiency concern of charging prices that reflect marginal costs; furthermore they introduce perverse incentives in the pattern of cost reduction. Subcosts are sometimes used in formal incentive schemes when the accounting manipulations and input allocations are thought not to affect their measures too much. These subcosts can be "external," such as those of raw material, subcontracting, or the workers' hourly wage. Or they can be "internal" in the sense that they represent the performance of a cost center (design, manufacturing, distribution).
A theory of incentives in procurement and regulation by Jean-Jacques Laffont
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