Moral hazard in risk-sharing agreements often occurs when an agent's actions cannot be observed directly. We consider the case in which there is some observable measure of the agent's performance that varies continuously with the agent's effort. We analyze contracts that allow for lump-sum bonus...

Salant's (1976) model of cartelized resource markets with competitive fringe producers predicts an evolution of prices that lies between the Hotelling predictions for monopoly and competition. The price trajectory Salant derives is the best the cartel can enforce against competitive behavior....

This article examines the optimal strategy for a regulator who seeks to maximize expected consumers' surplus and who faces some uncertainty about the technological capabilities of the firm being regulated. It is shown that the optimal strategy will generally induce the firm to adopt a cost...

The optimal regulatory strategy to promote research and development aimed at cost reduction is derived for an environment in which the firm's information about the technology of cost reduction, although initially imperfect, is better than that of the regulator. The manner in which the optimal...

The regulatory mechanism proposed by Vogelsang and Finsinger (V-F) will induce the regulated firm to adopt behavior other than myopic profit maximization. Pure waste, inefficient factor utilization, excessive research and development, and overinvestment in demand-increasing expenditures may be...