Template-Type: ReDIF-Paper 1.0
Title: Financing Infrastructure under Budget Constraint
Author-Name: Axel Gautier
Author-Name: Manipushpak Mitra
Author-Email: 
Classification-JEL: D82, H42, L51
Keywords: Regulation, Asymmetric Information, Budget Constraint
Abstract: In this paper we consider the problem of financing infrastructure when the regulator faces a budget constraint. The optimal budget-constrained mechanism 
	satisfies four properties. The first property is bunching at the top, that is the more efficient firms produce the same quantity. The second property is self-selection for the
 	less efficient firms. The third property is that the mechanism is a third best one. In other words, as long as the budget-constraint is binding, the optimal output is 
	strictly lower than the second best output for any given type. Finally, if the budget constraint is too strong, then we have a full bunching solution. 
Note: 
Length: 18
Creation-Date: 2002-06	
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse15_2002.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse15_2002