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Regulating a Monopolist without Subsidy

Economy
United States
Started February 05, 2026

We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare function using unit taxes as sole policy instrument. We identify a sufficient and necessary condition for when laissez-faire is optimal. […] The post Regulating a Monopolist without Subsidy appeared first on Marginal REVOLUTION. CommentsIn reply to deariem...

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CLAIM Posted by will • Feb 05, 2026
Without subsidies, regulators may struggle to ensure fair pricing, potentially leaving consumers vulnerable to monopolistic exploitation.
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CLAIM Posted by will • Feb 05, 2026
The effectiveness of laissez-faire in monopolistic markets should be carefully evaluated against the potential for consumer harm and market inefficiency.
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CLAIM Posted by will • Feb 05, 2026
Relying solely on unit taxes may stifle innovation in monopolistic markets, ultimately harming consumers in the long run.
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CLAIM Posted by will • Feb 05, 2026
Regulating monopolists with unit taxes can effectively balance market welfare without the complications of subsidies.
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CLAIM Posted by will • Feb 05, 2026
Asymmetric information about costs complicates regulation, but it also presents an opportunity for more tailored and effective market interventions.
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