Axel Gautier

Delegation and Information Revelation

This paper addresses the question of delegation in an organization where there is an initial asymmetry of information between the principal and the agent. We assume that the principal cannot use revelation techniques a la Baron Myerson to elicit agents superior information and in contrast, we posit that the decision and the state of the world parameter cannot be contracted for. With these simple contracts, we show that delegation is an alternative to contracting to elicit agents information. We can show that delegated decisions completely reveal the state of the world to the principal. Therefore the principal can extract agents information by giving up the control right over some decisions. As the organization takes a sequence of decisions, the information learned by the principal can be used for the other decisions. So delegation is only partial: the principal delegates some decisions and keeps control over other.

Competitively Neutral Universal Service Obligations

Universal service obligations impose specific costs on the universal service provider. The measure of these costs and their financing have been studied along two complementary lines of reasoning: is the universal service obligation sustainable? Who should bear its costs? Most often, a two-step procedure is put forward. In a first step the cost of USO must be assessed; in a second step the USP must be compensated for this cost. In this paper we argue that this procedure is most often problematic because the implementation of the compensation scheme directly affects the effective cost of USO. We therefore put forward an alternative approach to this problem which does not rely on this two-step procedure and fully acknowledges the distortions that result from the compensation mechanism.

Regulation of an open access essential facility

In this paper we consider the problem of regulating an open access essential facility. A vertically integrated firm owns an essential input and operates on the downstream market under the roof of a regulatory mechanism. There is a potential entrant in the downstream market. Both competitors use the same essential input to provide the final services to the consumers. The regulator designs a mechanism that guarantees financing of the essential input and adequate competition in the downstream market. We consider a regulatory mechanism that grants non-discriminatory access of the essential facility to a competitor. We show that this mechanism is welfare improving but it generates inefficient entry. That is a more efficient competitor may stay out of the market or a less efficient competitor may enter the market.

Access Pricing and Entry in the Postal Sector

Postal markets have been open to competition for a long time. But, with a few exceptions, the competitors of the incumbent postal operator are active on the upstream segments of the market -preparation, collection, outward sorting and transport of mail products. With the further steps planned in the liberalization process, there are new opportunities to extend competition to the downstream segments of the market -the delivery of mails. In the future, two business models will be possible for the new postal operators: (1) access: where the firm performs the upstream operations and uses the incumbents delivery network and (2) bypass where the competing firm controls the entire supply chain and delivers mails with its own delivery network. These two options have different impacts on welfare and the profit of the incumbent operator. The choice between access and bypass depends on the entrants delivery cost relative to the cost of buying access to the incumbent operator (the access price). In this paper, we derive optimal -welfare maximizing- stamp and access prices for the incumbent operator when these prices have an impact on the delivery method chosen by the entrant. We show how prices should be re-balanced when the entry method is considered as endogenous i.e. affected by the incumbents prices.

The Benefit and Cost of Winner-Picking: Redistribution Vs. Incentives

Representative implementations of devices and techniques provide communication between networked nodes operating on a communication network medium. In an implementation, a node generates a broadcast frame that includes at least a preamble and a payload. The preamble of the broadcast frame may include supplemental information. The supplemental information may be associated with one or more symbols of the preamble. The supplemental information may contain predetermined header information for use by nodes operating on the communication network medium.

Competing One-Way Essential Complements: The Forgotten Side of Net Neutrality

We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use ‚Aia strong form of net neutrality‚Ai is not welfare improving.

Access, bypass and productivity gains in competitive postal markets

orldwide, postal and delivery economics has attracted considerable interest. Numerous questions have arisen, including the role of regulation, funding the Universal Service Obligation, postal reform in Europe, Asia and North America, the future of national postal operators, demand and pricing strategies, and the principles that should govern the introduction of competition. Collected here are responses to these questions in the form of 24 essays written by researchers, practitioners, and senior managers from throughout the world.

A Theory of Soft Capture

In this paper, wee propose a model for regulatory capture that is based on information transmission and asymmetric information. In a three- tier model, a regulator is charged by a political principal to provide a signal for the type of a regulated firm. Only the firm can observe his type and the production of a correlated signal with a given accuracy is costly for the regulator. The firm can costlessly provide an alternative signal of lower accuracy that is presented to the regulator. In a self-enforcing equilibrium, the regulator transmits the firm-produced signal, internalizes its own savings in information cost and the firm enjoys higher information rents. The main feature of soft capture is that it is not based on a reciprocity of favors but on a congruence of interests between the firm and the regulator.

The benefit and cost of winner-picking: redistribution versus incentives

This paper examines the agency cost of winner-picking in multidivision firms and uses explicit incentive contracts to analyze the interaction between corporate headquarters´ investment and incentive policies. Winner-picking, i.e., the efficient reallocation of scarce resources in an internal capital market, adds an extra layer of noise to the moral-hazard problem of incentivizing division managers to produce the resources that can then be redistributed. In particular, division managers with strong future investment opportunities anticipate that headquarters will bail them out should they fail to produce enough resources themselves. This reduces incentives to create the resources in the first place, with possible consequences for the optimal investment policy.

Reforming the Postal Universal Service

Abstract The postal sector has undergone dramatic changes over the recent years under the double effect of ongoing liberalization and increased competition with alternative communication channels (e-substitution). As a result, the mail volume handled by the historical operator has declined sharply while the latter’s ability to match the same standard of universal service may be under threat. Thus, a reform of the postal universal service is on the agenda. This paper examines possible reforming options ranging from keeping universal service within the postal sector to redefining universal service as spanning postal and electronic technologies.