AØKK08366U Seminar: Regulation of firms and markets -cancelled
e know from microeconomic theory that perfect competition leads to efficient outcomes. Unfortunately, many markets are characterized by market faliures and inefficient outcomes.To improve welfare public authorities often regulate the firms to mitigate market faliure. However, regulation is not perfect and usually the ideal “first best” outcome cannot be achived.
An example is the case of natural monopolies, for example public utilities like electricity transmission, water mains, and railways. Unreguated monopolies will typically charge too high prices and produce to low quantities.
If a regulator forces a monopoly to set its price equal to marginal costs this may result in deficits, which must then be coverd by public fund, but this is costly. Further, if costs (marginal and/or fixed) are not verifiable, firms may have incentives to overstate costs if reimbursed.
Other examples of market faliure that may induce regulation are markets with externalities in production or consumption (e.g., pollution), network industries, and markets with assymmetric information.
In the seminar we will study regulation in different cases and markets. In particular, we will compare regulation used in practice to optimal or predicted regulation in models with realistic assumptions about information asymmetries, commitment, legal restrictions, distributional considerations and the social cost of public funds.
Papers for the seminar can focus on a regulatory theme or a specific market or sector. In either case, the paper should include a discussion of the applicability and interpretation of theoretical modeling for regulation in practice.
Possissible themes and applications include:
Rate-of-return vs. price-cap regulation, e.g., electricity transmission or water supply
Cost-reimbursement vs. fixed-price contracts in public procurement, e.g. construction of public infrastructure
Yardstick competition and benchmarking, e.g., electricity transmission or telecommunication
Regulation and incentives to invest in capital or R&D,e.g. telecommiunication
Regulation of mutiproduct firms
Access pricing, e.g., access to “raw copper” or termination of calls in telecommunication
Regulaton of quality, e.g., taxi transportation or emmission standards
Public service obligations, e.g., public utilities or postal service
Public ownership as an alternative to regulated private ownership, e.g., postal service or railway transportation
Participants are welcome to suggest other themes or applications..
Laffont, J-J. and J. Tirole (1993). A Theory of Incentives in Procurement and Regulation. Cambridge, MA: MIT Press.
Journal articles and public reports depending on the topics chosen by participants.
It will be an advantage to have further competences in strategic modeling, e.g., from having atteded a couse Industrial Organization, Incentives and Organization, or Mechanism Design.
Before the session a "so-finalized-as-possible"-draft of the paper must be uploaded in Absalon. After the presentations, the student submit an edited version of the paper in the Digital Exam portal as the final exam paper. The aim is that students use the presentation sessions as an opportunity to receive and use the constructive feedback to improve the paper.
• Planning meeting: September 5th, 2017 10-12
• Extra days of introducing teaching: September 7th and 12th 10-12
• Deadline commitmentpaper: In agreement with the lecturer and not later than 1st of October.
• Deadline of pre-assignment uploadet to Absalon: November 13th.
• Presentations/Workshops: Week 47, dates to be agreed depending on the number of participants.
Read about the study programme and curricula at MSc in Economics
- 7,5 ECTS
- Type of assessment
- Written examination- a seminar paper in English that meets the formal requirements for written papers stated in the curriculum and at KUNet for seminars.
- Exam registration requirements
- All aids allowed
- Marking scale
- 7-point grading scale
- Censorship form
- External censorship
- Exam period
Deadline for uploading the seminar paper to DE: 1st of December 2017 before 10:00 AM
Criteria for exam assesment
The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course and the objectives stated in the Curriculum.
- Project work