Coordination Modes Between Information Rent and Allocation Efficiency in the Design of Incentive Regulation Contracts
Yan Wang · China Industrial Economy · 2004
It made government regulation necessary that network industries have the characters of natural monopoly. However, the government must face and solve the adverse selection when designing the regulation contracts because the regulated enterprises stood the upper hand in the circumstances of information asymmetry. The article analyzed the forms of information rent and the conflicts between allocation efficiency and it by building the target function of social welfare maximization involving information rent, which subject to the participation and incentive constraints. It also gave the coordination modes between increasing resource allocation efficiency and decreasing information rent.