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Network Regulation Using an Agent

By J. McHardy, M. Reynolds and S. Trotter


This paper introduces a new regulatory concept: the independent profit-maximising regulatory agent, as a possible model for regulating network industries where complex demand interdependencies, in particular demand complementarities, make traditional methods of regulation difficult. We derive a simple theoretical network model with differentiated demands and explore alternative competitive and regulatory strategies. We show that the employment of an independent profit-maximising agent may offer a partial solution to the problem of network regulation, yielding outcomes which involve all parties pursuing their own interests yet are relatively desirable to both firms and society

Publisher: Department of Economics, University of Sheffield
Year: 2007
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