Vertical Integration in a Regulated Sector with Fiscal Constraints

Student: Balyakina Maria

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Final Grade: 7

Year of Graduation: 2018

In this paper we present a model of delegation which involves a downstream regulator, an upstream monopolistic firm and a public-private partnership. First, we present model setup for regulation, obligation and outsourcing scenarios, which lead us into delegation model with a choice of the price-setter. We, then, model two possible scenarios: where public-private partnership defines the price level and where government sets the price level, leaving the partnership with only administrative duties. In the final part of the paper we use several numerical examples to show, that there is several possible solutions to the model where delegating to the partnership becomes more socially efficient than obligation organizational form.

Full text (added June 15, 2018)

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