Regulation of network infrastructure investments: an experimental evaluation
AbstractThis paper reports the results of an experiment evaluating three regulatory schemes for network infrastructure, in terms of their ability to generate efficient levels of capacity investment. We compare the performance of (1) price cap regulation, (2) a regulatory holiday for new capacity, and (3) price cap regulation with long term contracts combined with a secondary market. We find that the price cap regulation outperforms the regulatory holiday as the latter creates an incentive to underinvest relative to optimal levels. Long term contracts also fail to improve on single price-cap regulation, and can provide more noisy signals about future demand and thus reduce investment.
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Bibliographic InfoArticle provided by Springer in its journal Journal of Regulatory Economics.
Volume (Year): 42 (2012)
Issue (Month): 1 (August)
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Web page: http://www.springerlink.com/link.asp?id=100298
Infrastructure investment; Experiment; Price cap; Regulatory holiday; C9; L51; L95;
Other versions of this item:
- Henze, B. & Noussair, C.N. & Willems, Bert, 2011. "Regulation of Network Infrastructure Investments: An Experimental Evaluation," Discussion Paper 2011-035, Tilburg University, Center for Economic Research.
- Henze, B. & Noussair, C.N. & Willems, Bert, 2011. "Regulation of Network Infrastructure Investments: An Experimental Evaluation," Discussion Paper 2011-019, Tilburg University, Tilburg Law and Economic Center.
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
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.:
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