In this paper we consider a regulated monopoly that can pad its costs to increaseits cost reimbursement. Even while padding is ineácient the optimal incentivescheme tolerates some padding of costs to reduce the information rents paid tolow cost types. It is shown that high cost ßrms pad costs...

This paper analyzes the relationship between the diffusion of new technologies and the decentralization of firms. Centralized control relies on the information of the principal, which we equate with publicly available information. Decentralized control, on the other hand, delegates authority to...