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Undominated monopoly regulation

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  • Debasis Mishra
  • Sanket Patil

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.

Suggested Citation

  • Debasis Mishra & Sanket Patil, 2024. "Undominated monopoly regulation," Papers 2408.09473, arXiv.org, revised Sep 2024.
    • Handle: RePEc:arx:papers:2408.09473
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    File URL: http://arxiv.org/pdf/2408.09473
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