Financing Infrastructure under Budget Constraint

Arbeitspapier

In this paper we consider the problem of financing infrastructure when the regulator faces a budget constraint. The optimal budget-constrained mechanism satisfies four properties. The first property is bunching at the top, that is the more efficient firms produce the same quantity. The second property is self-selection for the less efficient firms. The third property is that the mechanism is a third best one. In other words, as long as the budget-constraint is binding, the optimal output is strictly lower than the second best output for any given type. Finally, if the budget constraint is too strong, then we have a full bunching solution.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 15/2002

Classification and Topics

• Classification: Wirtschaft ; Publicly Provided Private Goods ; Asymmetric and Private Information; Mechanism Design ; Economics of Regulation
• Subject: Regulation ; Asymmetric Information ; Budget Constraint ; Infrastrukturinvestition ; Haushaltskonsolidierung ; Asymmetrische Information ; Budgetrestriktion ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gautier, Axel ; Mitra, Manipushpak
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/22825
• Last update: 10.03.2025, 11:43 AM CET