A Model of Final Offer Arbitration in Regulation
AbstractI study a regulatory process in which both the regulator and the regulated firm propose prices that, in case of disagreement, are settled through final-offer arbitration (FOA)—a practice currently used in Chile for setting prices in the water sector. Rather than submitting a single offer, each party simultaneously submits an offer for each of the firm’s cost units (e.g., cost of raw water, capital cost). While a multiple-offers scheme allow the arbitrator to better approximate her ideal settlement, it may induce parties to submit widely divergent offers. This divergence, however, does not affect the arbitrator’s ability to learn from the offers. Copyright Springer Science+Business Media, Inc. 2005
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 28 (2005)
Issue (Month): 1 (07)
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Web page: http://www.springerlink.com/link.asp?id=100298
final-offer arbitration; price regulation; Nash equilibrium;
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- Gustavo Ferro & Omar Chisari, 2010.
"Tópicos de Economía de la Regulación de los Servicios Públicos,"
- Chisari, Omar & Ferro, Gustavo, 2011. "Tópicos de Economía de la Regulación de los Servicios Públicos," UADE Textos de DiscusiÃ³n 65_2011, Instituto de Economía, Universidad Argentina de la Empresa.
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