Robust Monopoly Regulation
We study the regulation of a monopolistic firm using a non-Bayesian approach. We derive the 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 imposes a price cap. When his payoff is the total surplus of both consumers and the firm, he offers a capped piece- rate subsidy. For intermediate cases, the regulator uses both a price cap and a capped piece-rate subsidy. The optimal policy balances three goals: giving more surplus to consumers, mitigating underproduction, and mitigating overproduction.

Link to paper: yingniguo.com/wp-content/uploads/2019/12/robust-monopoly-regulation.pdf

Please sign up for meetings here: docs.google.com/spreadsheets/d/1bH85x-6DkQqESblvVoH5mySYRE0o8-4IIGx7I46Z4cE/edit#gid=0
Date: 12 March 2021, 14:15 (Friday, 8th week, Hilary 2021)
Venue: Held on Zoom
Speaker: Yigni Guo (Northwestern University)
Organising department: Department of Economics
Part of: Nuffield Economic Theory Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark