Multiproduct Price Regulation Under Asymmetric Information

Posted: 10 Oct 2000

See all articles by Mark Armstrong

Mark Armstrong

University College London - Department of Economics

John Vickers

University of Oxford - Department of Economics

Abstract

We discuss the regulation of a multiproduct monopolist when the firm has private information about cost or demand conditions. The regulator offers the firm a set of prices from which to choose. When there is private information only about costs, the firm should always have a degree of discretion over its pricing policy. When uncertainty concerns demand, whether discretion is desirable depends on how demand elasticities vary with the scale of demands. If a positive demand shock is associated with a reduction in the market elasticity, discretion is good for overall welfare; otherwise it is not.

Suggested Citation

Armstrong, Mark and Vickers, John, Multiproduct Price Regulation Under Asymmetric Information. Available at SSRN: https://ssrn.com/abstract=242001

Mark Armstrong (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

John Vickers

University of Oxford - Department of Economics ( email )

Manor Road Building
Manor Road
Oxford, OX1 3BJ
United Kingdom

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