This clear, precisely written text presents an important branch of the modern, micro-economically based theory of industrial organization and of public finance, utilizing calculus only.

Answers are provided to some pertinent economic questions, such as the pricing policies of vote-seeking politicians, of empire-building bureaucrats and of out-put-maximizing and energy-saving public utilities. These policies are compared with the welfare economic benchmark rules e.g. on marginal cost pricing and Ramsey pricing. Great significance is attached to price regulation.

The book elucidates the recent replacement of rate of return regulation by price-cap regulation. It also explains why many simple rules like yardstick regulation fail to achieve optimal prices, which shows how complicated it is to induce managers to truthfully reveal their private information. How this can be achieved properly is shown in various principal-agent models on regulation with uncertain costs, uncertain demand and with soft budget constraints.

• Front Cover 2
• Pricing and Price Regulation: An Economic Theory for Public Enterprises and Public Utilities 5
• Copyright Page 6
• Introduction to the Series 7
• An Overview of the Contents of this Book 9
• What is New in this Book? 11
• Table of Contents 13
• Chapter 1. Introduction 19
  • 1.1 Normative and Positive Theory 20
  • 1.2 The Institutional Setting 26
  • 1.3 Socialization of Commodities 30
  • 1.4 Nationalization of Enterprises 32
  • 1.5 Privatization in Market-Oriented Economies 36
  • 1.6 Privatization in Post-Communist Economies 47
• Part One: The Basic Pricing Model 53