A lesson from Argentina: Setting transmission tolls in a competitive auction is much better than regulating them
AbstractThere are at least two procedures for setting the tolls paid by power line users. One consists of regulating them in a standard process. The other, which is used in Argentina, involves auctioning the lines to the lowest toll. In this paper we show that an auction yields higher expected social welfare if n >= 2 bid. Expected social welfare is even higher if, as in Argentina, those who benefit from the line can also bid and build. Moreover, when the social welfare is utilitarian, an auction beats regulation even when the regulator can perfectly audit costs ex post. We describe and examine the auction of the fourth Comahue transmission line in Argentina. Assuming that the regulator's information about costs is similar to the information held by the industry, the model suggests that had tolls been regulated, they would have been at least 61% higher.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Energy Economics.
Volume (Year): 30 (2008)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/eneco
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laffont,Jean-Jacques, 2005.
"Regulation and Development,"
Cambridge University Press, number 9780521840187, December.
- David P. Baron & Roger B. Myerson, 1979.
"Regulating a Monopolist with Unknown Costs,"
412, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Paul Klemperer, 1999.
"Auction Theory: A Guide to the Literature,"
Economics Series Working Papers
1999-W12, University of Oxford, Department of Economics.
- Klemperer, Paul, 1999. "Auction Theory: a Guide to the Literature," CEPR Discussion Papers 2163, C.E.P.R. Discussion Papers.
- Paul Klemperer, 1999. "Auction Theory: A Guide to the Literature," Microeconomics 9903002, EconWPA.
- Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
- Chisari, Omar O. & Dal-Bo, Pedro & Romero, Carlos A., 2001.
"High-tension electricity network expansions in Argentina: decision mechanisms and willingness-to-pay revelation,"
Elsevier, vol. 23(6), pages 697-715, November.
- Chisari, Omar O. & Dal-Bó, Pedro & Romero, Carlos A., 2000. "High-Tension Electricity Network Expansions in Argentina: Decision Mechanisms and Willigness-to-Pay Revelation," UADE Working Papers 9_2000, Instituto de Economía, Universidad Argentina de la Empresa.
- Rafael Di Tella & Alexander Dyck, 2008. "Cost Reductions, Cost Padding, and Stock Market Prices: the Chilean Experience with Price-Cap Regulation," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
- Littlechild, S.C. & Ponzano, E.A., 2007.
"Transmission expansion in Argentina 5: the Regional Electricity Forum of Buenos Aires Province,"
Cambridge Working Papers in Economics
0762, Faculty of Economics, University of Cambridge.
- Littlechild, Stephen C. & Ponzano, Eduardo A., 2008. "Transmission expansion in Argentina 5: The regional electricity forum of Buenos Aires province," Energy Economics, Elsevier, vol. 30(4), pages 1491-1526, July.
- Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 4: A review of performance," Energy Economics, Elsevier, vol. 30(4), pages 1462-1490, July.
- Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 3: The evolution of policy," Energy Economics, Elsevier, vol. 30(4), pages 1420-1461, July.
- Littlechild, Stephen C. & Skerk, Carlos J., 2008. "Transmission expansion in Argentina 1: The origins of policy," Energy Economics, Elsevier, vol. 30(4), pages 1367-1384, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.