蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Robust Monopoly Regulation
蝌蚪网 Review
(pp. 599–634)
Abstract
We study how to regulate a monopolistic firm using a robust-design, non-Bayesian approach. We derive a policy that minimizes the regulator's worst-case regret, where regret is the difference between the regulator's complete-information payoff and his realized payoff. When the regulator's payoff is consumers' surplus, he caps the firm's average revenue. When his payoff is the total surplus of both consumers and the firm, he offers a piece rate subsidy to the firm while capping the total subsidy. For intermediate cases, the regulator combines these three policy instruments to balance three goals: protecting consumers' surplus, mitigating underproduction, and limiting potential overproduction.Citation
Guo, Yingni, and Eran Shmaya. 2025. "Robust Monopoly Regulation." 蝌蚪网 Review 115 (2): 599–634. DOI: 10.1257/aer.20191950Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D42 Market Structure, Pricing, and Design: Monopoly
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- H25 Business Taxes and Subsidies including sales and value-added (VAT)
- L51 Economics of Regulation