Regulating a multi-product monopolist

Abstract

The purpose of the present paper is to construct a regulatory scheme that serves to correct suboptimal behavior of a multi-product monopolist in a situation of doubly asymmetric information, where the regulator cannot observe the monopolist's cost structure and consumers' preference while the monopolist cannot identify consumer types. We construct a tax scheme that induces the monopolist to offer socially optimal qualities to all types of consumers and discuss some interesting features of the scheme.