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By Jean-Jacques Laffont

Extra then only a textbook, A idea of Incentives in Procurement and Regulation will advisor economists' learn on legislation for future years. It makes a tough and massive literature of the hot regulatory economics available to the typical graduate pupil, whereas supplying insights into the theoretical rules and stratagems no longer to be had in different places. in accordance with their pathbreaking paintings within the program of principal-agent conception to questions of rules, Laffont and Tirole enhance a man-made process, with a specific, even though now not unique, concentrate on the legislation of average monopolies comparable to army contractors, software businesses, and transportation specialists. The book's transparent and logical association starts with an creation that summarizes regulatory practices, recounts the heritage of inspiration that resulted in the emergence of the hot 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 constructed within the introductory bankruptcy is still an identical 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 matters, a casual description of the acceptable version, and an outline of the consequences and instinct. It then develops the formal research, together with adequate causes for people with little education in details economics or online game idea. Bibliographic notes supply a ancient point of view of advancements within the zone and an outline of complementary examine. precise proofs are given of all significant conclusions, making the publication worthwhile as a resource of recent study recommendations. there's a huge set of overview difficulties on the finish of the ebook. 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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Prices should accordingly reflect the differences in marginal costs. The simplest model of peak-load pricing is as follows: The firm chooses a capacity K to be used during n periods. The investment cost is c0K. At date , the firm produces at variable cost cqτ. The short-run marginal cost is thus c when qτ < K and when . The long-run marginal cost is [c0 + c]. Figure 2 shows the familiar tangency of the family of the short-term cost curves to the long-term cost curve in this example. Note that while the short-term production function exhibits decreasing returns to scale, the long-term production function has constant returns to scale.

The second stage consists in choosing the price level to equate revenue and revenue requirement, and in 38 39 choosing the relative prices. , industry, big customers and smaller consumers through their advocates or the attorney general) to bring relevant information to bear on the determination of the various variables in the two stages. 26 The second stage raises issues of price discrimination and cost allocation among product lines. Limited price discrimination might be allowed but with two constraints.

41 42 37. Price ceilings on some products are meant to protect specific classes of consumers and to prohibit some forms of price discrimination. Â < previous page page_17 next page > If you like this book, buy it! < previous page page_18 next page > Page 18 business services. ). AT&T can adjust its price on an individual service within some band on a two-week notice; the notice is a bit longer for price changes above the band (90 days) and below (45 days). If the firm wants its average price to exceed the cap, a lengthy regulatory process with full cost examination is launched that resembles COS regulatory reviews.

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