Mikael Mäkimattila

I study optimal monopoly regulation when inequality is a concern and both buyers and the firm hold private information. Correlation between buyers’ privately known valuations for quality and their welfare weights justifies inequality-aware pricing: the regulator mandates the firm to offer an inexpensive basic option with downward-distorted quality while granting the firm greater flexibility on pricing premium qualities. However, the firm’s private information about its demand creates a tension between redistribution among buyers and redistribution across the two sides of the market. The optimal regulatory mechanism uses both inequality-aware pricing and cost-plus pricing. I also analyze buyer-side subsidies as an alternative to firm-side regulation.

We characterize the optimal policy for correcting externalities when redistribution is a concern. When mitigation costs are private and heterogeneous, redistribution through income taxation alone is insufficient: the Pigouvian tax must also vary with income. This result informs the design of optimal carbon dividend policies: equal per-capita rebates are optimal only if incomes are unrelated to key sources of heterogeneity, including (i) heterogeneity in mitigation costs and (ii) the redistributive weights placed on horizontal equity. Using Finnish administrative data, we find that the optimal corrective policy is progressive for vehicle use but regressive for electricity consumption.

We consider the revenue-maximizing design and pricing of certification contracts. A certifier offers a menu of tests to an information sender, who holds partial private information about an unknown state and seeks to persuade an information receiver to take a favorable action. The selling mechanism gives information to the receiver through two channels: the actual informativeness of the tests and the sender’s choice among the options in the menu. We characterize the revenue-maximizing menu. In this menu, senders whose beliefs exceed an upper threshold purchase a common test that maximizes their joint surplus, whereas those whose beliefs fall below a lower threshold purchase no test. All sender types who purchase a test are indifferent across all options in the menu, and the receiver obtains zero surplus. We analyze how the results change if the certifier can conceal which test the sender selects.

We consider a market in which sellers privately choose vertical product qualities, consumers then receive information about the chosen qualities according to a predetermined information structure, and the sellers then compete à la Bertrand given consumers' posterior beliefs. We characterize the set of possible market outcomes for different information structures. With a monopoly seller, the seller-optimal information structure fully reveals the quality and incentivizes welfare-maximizing quality production. Under competition, the seller-optimal symmetric information structure is coarse and incentivizes randomization in quality choice, leading to vertical differentiation in terms of consumers' posterior beliefs.

We examine how the possibility of buyouts affects start-ups' incentives to innovate, enter markets and compete when there is asymmetric information about start-ups' prospects. Informational frictions may encourage a start-up to adopt a "fake-it-till-you-exit strategy" where it innovates little, enters the market without actual competitive advantage and captures the market by selling at a low price to signal it is valuable. Banning acquisitions may stimulate start-ups' innovation but decrease pre-buyout-stage competition.