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Public-Utility Regulators Are Only Human: A Positive Theory of Rational Constraints

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  • Evans, Lewis
  • Garber, Steven

Abstract

Positive models of public-utility regulation should capture personal incentives of regulators. A regulatory objective function is specified by appea l to standard human concerns coupled with politics and processes pecu liar to public-utility regulation. Constraints a rational regulator w ould impose on the firm are thereby derived, and connections between regulatory objectives and regulatory rules illuminated. Results inclu de theoretical rationales for "rate-of-return" regulation in a worl d of certainty, and a largely neglected type of "rate-of-return" re gulation under (symmetric) uncertainty. Other forms of regulation sho uld also be explicable in terms of personal motives of human regulato rs. Copyright 1988 by American Economic Association.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 78 (1988)
Issue (Month): 3 (June)
Pages: 444-62

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Handle: RePEc:aea:aecrev:v:78:y:1988:i:3:p:444-62

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Cited by:
  1. Larry Blank & John Mayo, 2009. "Endogenous Regulatory Constraints and the Emergence of Hybrid Regulation," Review of Industrial Organization, Springer, vol. 35(3), pages 233-255, November.
  2. Ingo Vogelsang, 2005. "Electricity Transmission Pricing and Performance-Based Regulation," CESifo Working Paper Series 1474, CESifo Group Munich.
  3. Kalu, Timothy Ch. U., 1995. "A uniform profit margin policy and its effects on mineral producing firms The case of the oil industry," Resources Policy, Elsevier, vol. 21(1), pages 61-72, March.
  4. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
  5. Ingo Vogelsang, 2010. "Incentive Regulation, Investments and Technological Change," CESifo Working Paper Series 2964, CESifo Group Munich.

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