With regard to market power, there are two broad principles. The first is obvious. Authorities should attempt at reducing the asymmetry of information: by collecting data of course; but also by benchmarking the firm’s performance to that of similar firms operating in different markets; and finally by auctioning off the monopoly rights (as firms reveal information about industry cost when competing with each other).
The second principle is that one size does not fit all: one should let the regulated firm make use of its information. Before we get to this, imagine that you are in charge of dealing with a contractor. Two familiar contracts will probably come to your mind: