China's Natural Monopoly Industries Incentive Regulatory Reform

The incentive regulation of natural monopoly industry came into being and developed on the basis of overcoming the disfigurements and limitation of conventional regulation. The basic cause of the failure of the conventional regulation theories and the conventional regulation schemes which is represented by the rate of return regulation(ROR) lies in the hypothesis of complete information and the drawback of weak incentives. The problems of adverse selection and moral hazard caused by the principal-agent relationship in asymmetric information revea"lincentive problem"in the regulation of natural monopoly industry. On the condition of asymmetric information, regulation contract can be only designed in the way of incentives under the framework of the the theory of principal-agent, so as to avoid the problem of regulation failure. As a result of the contradiction between incentives and rent extraction in the design of regulatory scheme,it is very difficult to achieve both productive efficiency and allocative efficiency simultaneously,therefore,incentives must trade-off with rent extraction in the design of regulatory contract. In practice,the incentive regulatory schemes,such as price caps regulation(PCR),have provided powerful incentives to promote productive efficiency for the regulated enterprises,but it not only achieve perfect industry efficiency,meanwhile,but also brought about the problems of exploiting rent and harming consumer surplus in the regulated enterprises. Therefore, the choice of incentive regulatory schemes is constrained by many conditions. In view of the current situation and main problems of the natural monopoly industries and regulation in China, the consistent view of incentive regulatory reform orientation of the natural monopoly industry in China has been reached. but the researches and literatures of the choice and design of incentive regulatory schemes are very inadequate.In essence,the theory of incentive regulation is the design theory of regulation contract reflecting the principal-agent relationship in asymmetric information. The design of regulatory scheme is constrained by many conditions, such as the information structure, imperfect regulator,etc.This thesis is to analyze the effect of information constraint on the design of regulatory scheme innovatively by modeling,...