Optimal regulation of network expansion

• 成果类型: Article
• 署名作者: Willems, Bert; Zwart, Gijsbert
• 署名单位: Tilburg University; Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; University of Groningen
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12217
• 发表日期: 2018
• 页码: 23-42
• 关键词: public-private partnerships; price-cap regulation; irreversible investment; incomplete contracts; RENEGOTIATION; RISK; firm; infrastructure; uncertainty; monopolist

摘要

We model the regulation of irreversible capacity expansion by a firm with private information about capacity costs, where investments are financed from the firm's cash flows and demand is stochastic. The optimal mechanism is implemented by a revenue tax that increases with the price cap. If the asymmetric information has large support, then the optimal mechanism consists of a laissez-faire regime for low-cost firms. That is, the firm's price cap corresponds to that of an unregulated monopolist, and it is not taxed. This maximal distortion at the top is necessary to provide information rents, as direct subsidies are not feasible.