Borges, Ana Pinto; Correia-da-Silva, João; Laussel, Didier - Faculdade de Economia, Universidade do Porto - 2009
We determine the optimal contract for the regulation of a bureaucratic firm in the case in which the bureaucratic bias is firm's private information. We find that output is distorted upward when the bureaucratic bias is low, downward when it is high, and equals a reference output when it is...