Strategic Firm Behavior Under Average-Revenue-Lagged Regulation
AbstractPrice caps have been shown to have incentive properties superior to traditional rate of return regulation. Average-revenue-lagged regulation (ARL) is attractive in that steady-state prices are known to be efficient. We show that the ARL scheme can be manipulated by the firm so as to yield the unregulated global profit maximum. While tests exist that can provide the regulator with evidence of this strategic behavior, we also demonstrate that the unregulated global profit maximum will not be attainable if Laspeyres (L) regulation is employed. Copyright Springer Science+Business Media, Inc. 2005
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.
Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 27 (2005)
Issue (Month): 1 (September)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100298
price caps; average-revenue-lagged regulation; laspeyres regulation; strategic behavior;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Georg Meran & Christian von Hirschhausen, 2006.
"A Modified Yardstick Competition Mechanism,"
Discussion Papers of DIW Berlin
559, DIW Berlin, German Institute for Economic Research.
- Kevin Currier, 2006. "Quality-Adjusted Laspeyres Price Caps: A Graphical Analysis," Atlantic Economic Journal, International Atlantic Economic Society, vol. 34(4), pages 481-490, December.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.