A Theory of Incentives in Procurement and Regulation

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MIT Press, 1993 - Business & Economics - 705 pages
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More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based on their pathbreaking work in the application of principal-agent theory to questions of regulation, Laffont and Tirole develop a synthetic approach, with a particular, though not exclusive, focus on the regulation of natural monopolies such as military contractors, utility companies, and transportation authorities.The book's clear and logical organization begins with an introduction that summarizes regulatory practices, recounts the history of thought that led to the emergence of the new regulatory economics, sets up the basic structure of the model, and previews the economic questions tackled in the next seventeen chapters. The structure of the model developed in the introductory chapter remains the same throughout subsequent chapters, ensuring both stability and consistency. The concluding chapter discusses important areas for future work in regulatory economics.Each chapter opens with a discussion of the economic issues, an informal description of the applicable model, and an overview of the results and intuition. It then develops the formal analysis, including sufficient explanations for those with little training in information economics or game theory. Bibliographic notes provide a historical perspective of developments in the area and a description of complementary research. Detailed proofs are given of all major conclusions, making the book valuable as a source of modern research techniques. There is a large set of review problems at the end of the book.Jean-Jacques Laffont is Professor of Economics at Université des Sciences Sociales in Toulouse where Jean Tirole is Scientific Director at the Institut d'Economié Industrielle.

 

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Contents

INTRODUCTION
1
Commonly Used Incentive Schemes
10
Received Theory and the Agenda for the
19
Methodology and Overview of the Book
35
References
47
COSTREIMBURSEMENT RULES
53
Contracts
69
PRICING BY A SINGLEPRODUCT FIRM WITH
129
REPEATED AUCTIONS OF INCENTIVE CONTRACTS
341
DYNAMICS WITHOUT COMMITMENT AND
375
COMMITMENT AND RENEGOTIATION
437
REGULATORY CAPTURE
475
COST PADDING AUDITING AND COLLUSION
515
CARTELIZATION BY REGULATION
537
AUCTION DESIGN AND FAVORITISM
559
REGULATORY INSTRUMENTS HEARINGS
591

PRICING AND INCENTIVES IN A MULTIPRODUCT FIRM
165
Model
186
REGULATION OF QUALITY
211
COMPETITIVE RAMSEY FORMULAS AND ACCESS
247
BYPASS AND CREAM SKIMMING
273
AUCTIONING INCENTIVE CONTRACTS
307
COMMITMENT AND POLITICAL ACCOUNTABILITY
619
PRIVATIZATION AND INCENTIVES
637
CONCLUSION
661
REVIEW EXERCISES
671
INDEX
695
Copyright

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About the author (1993)

Jean-Jacques Laffont is Professor of Economics at the Universite des Sciences Sociales de Toulouse and the Institut Universitaire de France and Director of the Institut d'Economie Industrielle.

Bibliographic information