As one of the foremost experts of the topic, Professor Jean-Jacques Laffonte believes in the importance of applying economics to the debate over utility regulation in the United States. He sees regulation as the new frontier in the socialist debate. In other words, should public intervention be part of our economy? One of the topics to which this question leads is telecommunication pricing in rural and urban areas and “universal service” litigation. The debate is …showed first 75 words of 589 total…

…showed last 75 words of 589 total…to minimize costs but it gives up “rents;” if the firms do well it gives up money to the government. The new theory on regulation is based on asymmetric information on cost. The regulation must give up costly rents because of a trade-off between efficiency and rent extraction. This optimal regulation, according to Professor Laffonte, should include a menu of cost reimbursement rules and Ramsey pricing. Conclusion: we have an incentive and a delegation problem.