This chapter reviews recent theoretical work on the design of regulatory policy, focusing on the complications that arise when regulated suppliers have better information about the regulated industry than do regulators. The discussion begins by characterizing the optimal regulation of a monopoly...

We analyze a principal-agent setting with multiple sources of contracting information in which the signal from each source can be unmistakably interpreted as "good" or "bad" news. We then ask whether it is best to condition the acquisition of one of the information sources on whether the earlier...