Year: 2024
Type: preprint
Abstract: We study undominated mechanisms with transfers for regulating a monopolist who privately observes the marginal cost of production. We show that in any undominated mechanism, there is a quantity floor, which depends only on the primitives, and the regulator's operation decision is stochastic only if the monopolist produces at the quantity floor. We provide a near-complete characterization of the set of undominated mechanisms and use it to (a) provide a foundation for deterministic mechanisms, (b) show that the efficient mechanism is dominated, and (c) derive a max-min optimal regulatory mechanism.
Source: arXiv (Cornell University)
Authors: Mishra, Debasis, Patil, Sanket
Language: English
Field: Decision Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4403555340