An optimal regulation in an intertemporal oligopoly market: The Generalized Incremental Surplus Subsidy (GISS) scheme

Abstract

The purpose of the present paper is to design an optimal non-Bayesian subsidy scheme (called the Generalized Incremental Surplus Subsidy (GISS) scheme) in an intertemporal oligopoly market when the regulator has no information about firms cost structure. The GISS scheme is a generalization of two previously proposed optimal schemes and it is shown that most of the properties of the two schemes are preserved with appropriate modifications (if necessary). Other interesting features that pertain especially to the GISS scheme are analyzed. The method of constructing the GISS scheme is different from the conventional ones and is carefully discussed. © 1995.