Regulatory reform had its beginnings in the United States in the 1970s, and today it is taking place around the globe. One of the central questions for industrial policy is how to regulate firms with market power. Regulatory Reform tackles this important policy issue in two parts: it describes...

The regulator of a natural monopoly that sets a two-part tariff and whose marginal cost is stochastic will generally want the price to vary less than marginal cost when the lump-sum charge in the tariff is fixed. A trade-off exists between efficient pricing and an optimal allocation of risk....

The paper develops a model of decentralized metering decisions when selective metering is socially optimal. Households choose between two-part tariffs. Decentralization achieves social efficiency when the regulator, who knows household characteristics, gives household-specific compensation (via...

Published as an article in: American Economic Review, 2010, vol. 100, issue 4, pages 1601-15.

The paper shows how commodity taxes can provide insurance to consumers when the producer price is volatile. Specific and ad valorem taxes have differing roles. The optimal specific tax is positive when demand has some elasticity. The optimal ad valorem rate is zero when demand is unit-elastic,...

Sufficient conditions are developed for third-degree price discrimination by a monopolist serving all markets to reduce and raise social welfare.  Welfare falls if the demand function in the market whose price is higher with discrimination is at least as convex as that in the other market (at...

The welfare effects of third-degree price discrimination are analyzed when demand in one market is an additively shifted version of demand in the other market and both markets are served with uniform pricing. Social welfare is lower with discrimination if the slope of demand is log-concave or...

This paper uses convexity arguments to determine the effects of monopolistic third-degree price discrimination on total output and welfare. We focus on benchmark cases, including constant demand elasticities, with constant curvature of inverse demand σ. We show how the effects of price...