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Regulatory policy design in an uncertain world
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Chambers, Robert G. and Melkonyan, Tigran A. (2010) Regulatory policy design in an uncertain world. Journal of Public Economic Theory, Volume 12 (Number 6). pp. 1081-1107. doi:10.1111/j.1467-9779.2010.01486.x ISSN 1097-3923.
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Official URL: http://dx.doi.org/10.1111/j.1467-9779.2010.01486.x
Abstract
The paper examines principal–agent relationships in uncertain environments where beliefs of the contracting parties (the regulator and the firm) are represented by sets of probabilities. In addition to fully characterizing the first-best and the second-best solutions, we examine optimality of zero-risk, fixed-payment schemes and the relationship between the first-best and the second-best solutions. In the second-best world, where the regulator can only contract on the quality of the good, a zero-risk standard is optimal when the firm has beliefs that are so ambiguous that the firm’s marginal rate of transformation belongs to the set of the firm’s relative probabilities.
Item Type: | Journal Article | ||||||||||
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Subjects: | H Social Sciences > HJ Public Finance | ||||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Behavioural Science Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Risk management | ||||||||||
Journal or Publication Title: | Journal of Public Economic Theory | ||||||||||
Publisher: | Blackwell | ||||||||||
ISSN: | 1097-3923 | ||||||||||
Official Date: | December 2010 | ||||||||||
Dates: |
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Volume: | Volume 12 | ||||||||||
Number: | Number 6 | ||||||||||
Number of Pages: | 26 | ||||||||||
Page Range: | pp. 1081-1107 | ||||||||||
DOI: | 10.1111/j.1467-9779.2010.01486.x | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Funder: | United States. Department of Agriculture. Economic Research Service (ERS), United States. Department of Agriculture (USDA), University of Maryland | ||||||||||
Grant number: | (#58300060058) |
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