Regulation of a Risk Averse Firm |
| |
Authors: | Jean-Jacques Laffont Jean-Charles Rochet |
| |
Institution: | Institut Universitaire de France, GREMAQ–IDEI, Université des Sciences Sociales, F-31042, Toulouse cedex, France |
| |
Abstract: | We extend the Laffont–Tirole regulation model to the case of risk-averse firms. Our main results are:- • The impact of risk aversion is to shift the optimal contract toward a cost-plus contract.
- • As compared with the risk-neutral case, distortions are greater and informational rents are smaller.
- • For high levels of risk aversion, the optimal contract involves cost ceilings and the less efficient firms are bunched together.
Journal of Economic LiteratureClassification Numbers: D8, L5. |
| |
Keywords: | regulation risk bunching cost-plus contracts |
本文献已被 ScienceDirect 等数据库收录! |
|