Suchergebnisse

We discuss the decision to delegate the regulation of pollution through sales of permits to a biased expert in a situation where the polluting firm has private information about its technology. We consider, in particular, constrained delegation where the government puts restrictions on the amount of pollution that the expert can sell permits for. We find that, in general, delegation is more likely if the firm is low-cost. This is not in line with the so-called uncertainty principle, which states that there is more delegation the more uncertainty the government faces.

We discuss a government's incentives to delegate regulation to bureaucrats. The government faces a trade‐off in its delegation decision: bureaucrats have knowledge of the firms in the industry that the government does not have, but at the same time, they have other preferences than the government. The preference bias and the private information interact to affect the incentives to delegate regulation. Allowing for constrained delegation, we introduce the concepts of weak and strict delegation. We find that bureaucratic discretion reduces with bureaucratic drift, while the effect of increased uncertainty about the firm's technology depends on how that uncertainty changes.

We discuss a government's incentives to delegate regulation to bureaucrats. The government faces a trade-off in its delegation decision: bureaucrats have knowledge of the firms in the industry that the government does not have, but at the same time, they have other preferences than the government. The preference bias and the private information interact to affect the incentives to delegate regulation. Allowing for constrained delegation, we introduce the concepts of weak and strict delegation. We find that bureaucratic discretion reduces with bureaucratic drift, while the effect of increased uncertainty about the firm's technology depends on how that uncertainty changes. ; This research has received funding from the ESOP Centre at the University of Oslo, with which both authors are associated. ESOP has received support from the Research Council of Norway through its Centres of Excellence funding scheme, project number 179552. ; publishedVersion

We develop a model to discuss a government's incentives to delegate to bureaucrats the regulation of an industry. The industry consists of a polluting firm with private information about its production technology. Implementing a transfer-based regulation policy requires the government to make use of a bureaucracy; this has a bureaucratic cost, as the bureaucracy diverts a fraction of the transfer. The government faces a trade-off in its delegation decision: bureaucrats have knowledge of the firms in the industry that the government does not have, but at the same time, they have other preferences than the government, so-called bureaucratic drift. We study how the bureaucratic drift and the bureaucratic cost interact to affect the incentives to delegate. Furthermore, we discuss how partial delegation, i.e., delegation followed by laws and regulations that restrict bureaucratic discretion, increases the scope of delegation. We characterize the optimal delegation rule and show that, in equilibrium, three different regimes can arise that differ in the extent of bureaucratic discretion. Our analysis has implications for when and how a government should delegate its regulation of industry. We find that bureaucratic discretion reduces with bureaucratic drift but that, because of the nature of the regulation problem, the effect of increased uncertainty about the firm's technology on the bureaucratic discretion depends on how that uncertainty is reduced.

We develop a model to discuss a government's incentives to delegate to bureaucrats the regulation of an industry. The industry consists of a polluting firm with private information about its production technology. Implementing a transfer-based regulation policy requires the government to make use of a bureaucracy; this has a bureaucratic cost, as the bureaucracy diverts a fraction of the transfer. The government faces a trade-off in its delegation decision: bureaucrats have knowledge of the firms in the industry that the government does not have, but at the same time, they have other preferences than the government, so-called bureaucratic drift. We study how the bureaucratic drift and the bureaucratic cost interact to a affect the incentives to delegate. Furthermore, we discuss how partial delegation, i.e., delegation followed by laws and regulations that restrict bureaucratic discretion, increases the scope of delegation. We characterize the optimal delegation rule and show that, in equilibrium, three different regimes can arise that differ in the extent of bureaucratic discretion. Our analysis has implications for when and how a government should delegate its regulation of industry. We find that bureaucratic discretion reduces with bureaucratic drift but that, because of the nature of the regulation problem, the effect of increased uncertainty about the firm's technology on the bureaucratic discretion depends on how that uncertainty is reduced.

Abstract
To control Medicaid's expenditure on prescription drugs, 1990 legislation established a rebate program guaranteeing Medicaid a rebate on each unit purchased by Medicaid participants. The rebate is the difference between the minimum price and the average manufacturer price (minimum price rule) or a proportion of the average manufacturer price (average price rule). We characterize the optimal pricing strategy of a third-degree price discriminating monopolist under these rules. Under the minimum price rule, the minimum price gross of rebate always increases whereas prices gross of rebate in at least some of the markets always decrease. In contrast, under the average price rule, these prices may move in the same direction in all markets, with all increasing in some circumstances and all decreasing in others. We also examine the effects of such provisions on social welfare. We analyze a modified version of our minimum price rule model suitable for applications beyond Medicaid.