Economics of Regulation (Fall 2026)
Why do many governments set the prices of electricity, water, and gasoline? This course is about the regulator’s problem: designing rules for firms with unobserved costs, facing pressure from multiple interest groups, while using tools that have unintended consequences. The organizing question is not: should we regulate? Instead, it is: how should we choose among imperfect institutions?
The first half of the course builds the toolkit: natural monopoly, pricing, asymmetric information, and the political economy of regulation. Mexico is used as the running example to illustrate these ideas. The second half turns to the harder job for a modern regulator: remaking and creating markets. Here we will analyze the design of markets for electricity, environmental emissions, and digital platforms.
By the end of this course, you should be able to do the following:
set up and solve the core economic models of regulation, in graphical and numerical form;
skeptically evaluate any proposed regulation, by identifying the market failure it claims to address, the interests behind it, its unintended consequences, and the alternatives;
interpret empirical evidence on the causes and effects of regulation;
apply the tools in practice, by writing and defending a regulatory filing, and designing bidding strategies in a wholesale electricity market; and
explain how the design of regulatory institutions shapes outcomes, both in Mexico and in other countries.