Adaptive Monopoly Regulation

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Regulation proves robustly adaptive: using adversarial online learning and new solution concepts (calibration and counterfactual calibration) a simple policy of customer-first regulation—pay the firm a subsidy tied to estimated consumer surplus and tax gross profits—is constructed. The design uses light randomized experiments to get unbiased consumer‑surplus estimates, sets roughly 76% subsidy / 12% tax in the calibrated instance, and guarantees about 86% of first‑best welfare (with a proven upper bound near 89%).

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1. 0:00Start
2. 16:07Firm's Objective
3. 16:42Regulator's Objective
4. 22:15Alternatives
5. 23:16Solution Concepts
6. 24:34Regulator's Regret
7. 27:34Consistency Axiom
8. 28:23Justifiability Axiom
9. 34:24Proof Steps for Theorem 1
10. 37:55Estimating Consumer Surplus
11. 38:54Incentives for Pricing
12. 39:47Incentives for Effort
13. 43:51Counterfactual Calibration