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Optimal regulation of network expansion.

Abstract: We model the regulation of irreversible capacity expansion by a firm with private information about capacity costs, where investments are financed from the firm's cash flows and demand is stochastic. The optimal mechanism is implemented by a revenue tax that increases with the price cap. I...

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Published in:RAND Journal of Economics (Wiley-Blackwell) Vol. 49; no. 1; pp. 23 - 43
Main Authors: Willems, Bert, Zwart, Gijsbert
Format: Article
Published: Wiley-Blackwell Spring2018
Subjects:
Investments
Economic demand
Cash flow
Price regulation
Corporate finance
Online Access:View this record in EBSCOhost

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