Journal Article More on Prices vs. Quantities Get access Jean Jacques Laffont Jean Jacques Laffont Laboratoire d'Econométrie de l'Ecole Polytechnique, Paris Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 44, Issue 1, February 1977, Pages 177–182, https://doi.org/10.2307/2296982 Published: 01 February 1977 Article history Received: 01 March 1975 Accepted: 01 August 1975 Published: 01 February 1977

Journal Article First-Order Certainty Equivalence with Instrument-Dependent Randomness Get access Jean-Jacques Laffont Jean-Jacques Laffont University of Montreal Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 42, Issue 4, October 1975, Pages 605–614, https://doi.org/10.2307/2296797 Published: 01 October 1975

The new economics of regulation is an application of the principal-agent methodology to the contractual relationship between regulators and regulated firms. After a critique of the traditional paradigms of regulation from the point of view of information economics a canonical model of regulation under asymmetric information is developed. A survey of the main results obtained in the new economics of regulation is then provided, in particular concerning the implementation of optimal contracts by a menu of linear contracts, the dichotomy between pricing and cost reimbursement rules, the auctioning of incentive contracts, the dynamics of contracting under limited commitment, and the hierarchical problems in regulation. Empirical implications are then discussed and avenues of further research are described in the conclusion.

[Rational expectations equilibria are analyzed as incentive compatible mechanisms. The sense in which they can be implemented is made precise. Then, a welfare analysis of these equilibria is carried out within the class of mechanisms having the same incentive compatibility properties and the same communication constraints.]

As was shown by Dewatripont, optimal long-term contracts under asymmetric information are generally not time-consistent. This paper fully characterizes the equilibrium of a two-period procurement model with commitment and renegotiation. It also analyzes whether renegotiated long-term contracts yield outcomes resembling those under either unrenegotiated long-term contracts or a sequence of short-term contracts, and links the analysis with the multiple unit durable good monopoly problem.

This paper provides a systematic study of planning procedures with public goods in which local truthful revelation of preferences is a dominant strategy. These procedures are said to be strongly locally individually incentive compatible (SLIIC). We first characterize the (time invariant) continuously differentiable planning procedures that are SLIIC. Then, we study properties such as balancedness, cheatproofness with respect to coalitions, neutrality, individual rationality and we point out the connection with the MDP procedures.

The paper studies a simple two-period principal/agent model in which the principal updates the incentive scheme after observing the agent's first-period performance. The agent has superior information about his ability. The principal offers a first period incentive scheme and observes some measure of the agent's first-period performance (cost or profit), which depends on the agent's ability and (unobservable) first-period effort. The relationship is entirely run by short-term contracts. In the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit. The strategies are required to be perfect, and updating of the principal's beliefs about the agent's ability follows Bayes' rule. The central theme of the paper is that the ratchet effect leads to much pooling in the first period. First, for any first-period incentive scheme, there exists no separating equilibrium. Second, when the uncertainty about the agent's ability is small, the optimal scheme must involve a large amount of pooling. The paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty.

[This paper shows how a number of questions about dominant strategy mechanisms in models with public goods can be conveniently formulated as systems of partial differential equations. The question of the existence of dominant strategy mechanisms with given desirable properties becomes equivalent to the integrability of these equations.]

[We construct a monthly model of supply and demand for chartered banks' loans to business firms in Canada. Recent disequilibrium econometric methods are used to take into account possibilities of rationing.]

This paper develops a normative model of regulatory policy toward bypass and cream skimming. It analyzes the effects of bypass on second-degree price discrimination, on the rent of the regulated firm, and on the welfare of low-demand customers. It shows that pricing under marginal cost may be optimal for the regulated firm, excessive cream skimming occurs if access to the bypass technology is not regulated, and the prohibition of bypass may increase or decrease the regulated firm's rent. Copyright 1990 by American Economic Association.