Abstract:Within a standard three-tier regulatory model, a benevolent principal delegates to a regulatory agency two tasks: the supervision of the …rm's (two-type) costs and the arrangement of a pricing mechanism. The agency may have an incentive to manipulate information to the principal to share the gains of collusion with the …rm. The novelty of this paper is that both the regulatory mechanism and the side contracting between the agency and the …rm are modelled as a bargaining process. While as usual the ine¢ cient …… Show more
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