Publication:
Environmental contracting: a case study

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Authors
Kubiak, Joseph C.
Subjects
NA
Advisors
Stone, Mark W.
Adams, Rebecca J.
Date of Issue
1994-06
Date
June 1994
Publisher
Monterey, California. Naval Postgraduate School
Language
en_US
Abstract
The end of cold war levels of defense expenditures has promoted the reduction in the number of defense-related companies, creating potential monopolistic economic scenarios for defense procurement. This thesis studies one methodology to deal with these scenarios, based on the Baron-Myerson monopolist regulation mechanisms. The Baron-Myerson mechanism provides a tool to regulate monopolists when their costs are unknown or cannot be measured, because it is designed as to compel the producer to reveal its costs by maximizing the company's profit when it announces their true value. The government presents a modified purchasing plan to the producer, buys according to the announced costs and pays a subsidy (or levies a tax) to the producer. To apply Baron-Myerson the government needs to know the demand for the good or service it requires, and an estimate of probability density function for the possible costs of the project. This second assumption is the issue addressed in this thesis. The thesis establishes selection criteria and policy recommendations that the government can use to choose a probability density function for the application of Baron-Myerson. The criteria is based on the maximization of the expected government gain, given the level of efficiency of the producer. Also, an analysis of the policy implications of the government's choice is made, to determine the effects of a change in policy on the total welfare, the firm's profits and the government gain.
Type
Thesis
Description
Series/Report No
Department
Organization
Naval Postgraduate School (U.S.)
Identifiers
NPS Report Number
Sponsors
Funder
Format
58 p.
Citation
Distribution Statement
Approved for public release; distribution is unlimited.
Rights
This publication is a work of the U.S. Government as defined in Title 17, United States Code, Section 101. Copyright protection is not available for this work in the United States.
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