This paper explores the implications of asymmetric cost information within the context of a regulated natural monopoly. We provide a unifying framework for the analysis of "cost padding" and/or exaggeration, both of which we refer to simply as "misreporting of costs." We study the incentives...

Postal reform (liberalization) is occurring rapidly around the world, perhaps most notably in the EU where January 1, 2011 was the date of Full Market Opening (FMO). As a strategy for maintaining the Universal Service Obligation (USO) under FMO, several authors suggest that the sale of access to...

A system of Tradable Green Certificates (TGCs) is a market-based subsidy scheme designed to promote electricity generation from renewable energy sources such as wind power. Under a TGC system, the principal policy instrument is the “percentage requirement,” which stipulates the percentage of...

The two forms of natural monopoly regulation that are typically discussed in Intermediate Microeconomics textbooks are marginal cost pricing and average cost pricing (rate of return regulation). However, within the last 20 years, price cap regulation has largely replaced rate of return...