Provision of quality and power of incentive schemes in regulated industries.

Summary "We study the incentives of a regulated monopoly to supply quality. For an experience good, the current level of sales yields no information about quality and the cost reimbursement rule is the only instrument to achieve the conflicting goals of revision of quality and cost reduction. A high concern for quality in the discount factor raises the power of incentive schemes. In contrast, for a search good, direct sales incentives can be provided to supply quality : whether a high quality concern drives optimal contracts toward cost-plus or fixed-price contracts then depends on whether quantity and quality are net substitutes or net complements.".