I study a regulatory process in which both the regulator and the regulated firm propose prices that in case of disagreement are settled through final-offer arbitration – a practice currently used in Chile for setting prices in the water sector. Rather than submitting a single offer, each...

The market mechanisms built into the Kyoto Protocol have the potential of significantly reducing costs of limiting greenhouse gases. But if trading proceeds on a bilateral project-by-project basis rather than on a frictionless market, the total cost saving potential of trading is unclear. This...