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Incentives for Conservation and Quality-Improvement by Public Utilities

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  • Lewis, Tracy R
  • Sappington, David E M

Abstract

The authors examine the design of incentive programs to motivate regulated utilities to supply both basic service (e.g., electricity supply, local telephone service) and service enhancements (e.g., energy-conservation services, improved clarity and speed of voice communication). The optimal regulatory programs are shown to vary greatly, depending upon the information available to the regulator. The price of the basic service may optimally be distorted above or below marginal cost to better motivate the supply of the service enhancement. The authors' policy prescriptions are compared with current programs and proposals to promote energy conservation. Copyright 1992 by American Economic Association.

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Bibliographic Info

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

Volume (Year): 82 (1992)
Issue (Month): 5 (December)
Pages: 1321-40

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Handle: RePEc:aea:aecrev:v:82:y:1992:i:5:p:1321-40

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Cited by:
  1. Caplan, Arthur J., 2003. "Reputation and the control of pollution," Ecological Economics, Elsevier, vol. 47(2-3), pages 197-212, December.
  2. Stéphane Auray & Thomas Mariotti & Fabien Moizeau, 2011. "Dynamic regulation of quality," Working Papers 245736, Institut National de la Recherche Agronomique, France.
  3. Leon Chu & David Sappington, 2013. "Motivating energy suppliers to promote energy conservation," Journal of Regulatory Economics, Springer, vol. 43(3), pages 229-247, June.
  4. MOIZEAU, Fabien & MARIOTTI, Thomas & AURAY, Stéphane, 2007. "Dynamic Regulation of Public Good Quality," 2007 Meeting Papers 335, Society for Economic Dynamics.
  5. Bierens, Herman J. & Swanson, Norman R., 2000. "The econometric consequences of the ceteris paribus condition in economic theory," Journal of Econometrics, Elsevier, vol. 95(2), pages 223-253, April.
  6. Claus Huber & Franz Wirl, 1996. "Optimal incentives to reduce transboundary emissions: Theory and empirical illustration to sulphur emissions in Austria and (former) Czechoslovakia," Empirica, Springer, vol. 23(2), pages 149-172, June.
  7. Leon Chu & David Sappington, 2012. "Designing optimal gain sharing plans to promote energy conservation," Journal of Regulatory Economics, Springer, vol. 42(2), pages 115-134, October.
  8. Kooreman, Peter, 1996. "Individual discounting, energy conservation, and household demand for lighting," Resource and Energy Economics, Elsevier, vol. 18(1), pages 103-114, March.
  9. Franz Wirl & Wolfgang Orasch, 1998. "Analysis of United States' Utility Conservation Programs," Review of Industrial Organization, Springer, vol. 13(4), pages 467-486, August.

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