Jean-Jacques Laffont

Professor of Economics Jean-Jacques Laffont

Jean-Jacques Laffont provides the first theoretical analysis of regulation of public services for less developed countries (LDC's). He shows how the debate between price-cap regulation and cost of service regulation is affected by the characteristics of LDCs, develops a new theory of regulation with limited enforcement capabilities, and discusses the delicate issue of access pricing in view of LDC's specificities. Based on organization theory and history, and using empirical tests where possible, Laffont's evaluation of the different ways to organize the regulatory institutions makes a significant contribution to the field.

Regulation and Development

Mainstream economics has recognized only recently the necessity to incorporate political constraints into economic analysis intended for policy advisors. Incentives and Political Economy uses recent advances in contract theory to build a normative approach to constitutional design in economic environments.The first part of the book remains in the tradition of benevolent constitutional design with complete contracting. It treats politicians as informed supervisors and studies how the Constitution should control them, in particular to avoid capture by interest groups. Incentive theories for the separation of powers or systems of checks and balances are developed.The second part of the book recognises the incompleteness of the constitutional contract which leaves discretion to the politicans selected by the electoral process. Asymmetric information associates information rents with economic policies and the political game becomes a game of costly redistribution of those rents. Professor Laffont investigates the trade-offs between an inflexible constitution which leaves little discretion to politicians but sacrifices ex post efficiency and a constitutionweighted towards ex post efficiency but also giving considerable discretion to politicians to pursue private agendas.The final part of the book reconsiders the modeling of collusion given asymmetric information. It proposes a new approach to characterizing incentives constraints for group behaviour when asymmetric information is non-verifiable. This provides a methodology to characterise the optimal constitutional response to activities of interest groups and to study the design of any institution in which group behavior is important.

Professor of Economics Jean-Jacques Laffont

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