@article{db01adae5305465ca2e12aad94aa990d,
title = "Regulation and information in a continuing relationship",
abstract = "Regulation typically involves a continuing relationship between a regulator and a firm, and that relationship is often complicated by asymmetric information. A multiperiod model of this relationship is analyzed in which a regulated firm has private information about its costs which may changed over time in a manner observable only to the firm. The regulator is assumed to be able to commit to a policy for the entire regulatory horizon, and the optimal pricing policy is shown to depend on an informativeness measure that indicates how information by the firm in one period will be used in future periods.",
keywords = "Regulation, information economics, multiperiod model, revelation game",
author = "Baron, {David P.} and David Besanko",
note = "Funding Information: The establishment of prices in the context of a continuing relationship is complicated by the superior information possessed by the firm about what its costs will be in the periods for which the prices will be in effect. Learning by the regulator is also complicated by events that are observable only to the regulated firm, and monitoring by the regulator is generally imperfect and costly. In such circumstances a regulator typically seeks reports from the firm about its costs. The firm in this case has a natural incentive to overstate its costs in the hope of obtaining a price, and hence profits, higher than that which *The authors would like to thank David Brown, Joel Demski, and Jean Tirole for their helpful comments. The research has been supported by NSF Grant Nos. SES 81-06911, SES 8320119, and SES 8408335.",
year = "1984",
doi = "10.1016/0167-6245(84)90006-4",
language = "English (US)",
volume = "1",
pages = "267--302",
journal = "Information Economics and Policy",
issn = "0167-6245",
publisher = "Elsevier B.V.",
number = "3",
}