On optimal regulation of price and R&D with asymmetric information

This paper deals with the optimal regulation for cost-reducing R&D and pricing in natural monopoly that is privately informed on its efficiency. We extend the work of Cantner and Kuhn (Rev Econ Des 4:191–204, 1999) and then we are able to analyse the entire effects of the interplay between agent’s efficiency and investment in R&D particularly considering the substitutability case.