The paper provides a tractable, analytical framework to study regulatory risk under optimal incentive regulation. Regulatory risk is captured by uncertainty about the policy variables in the regulator's objective function: weights attached to profits and costs of public funds. Results are as...

The paper provides a tractable, analytical framework to study regulatory risk. Regulatory risk is captured by uncertainty about the policy variables in the regulator's objective function: weights attached to profits and costs of public funds. Results are as follows: 1) The regulator's reaction...

This note revisits the problem of rent extraction in situations where agents are uncertain about the private information of others, represented by multiple probabilistic assessments. A generalization of convex independence (Crémer and McLean, 1985 and 1988) is necessary and sufficient for full...