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The Relationship of Rent-Seeking Behavior to Impacted Information in Public Utility Regulation

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  • Mantell, Edmund H

Abstract

This article demonstrates the rent seeking by customers of regulated electric utilities in the form of rate suppression leads to a set of regulated prices that is not Pareto optimal over time. A multiperiod economic model of rate regulation shows that, if customers are willing to accept immediate short-term losses in economic welfare to allow the utility to enjoy larger profits, the discounted value of future increments to customer welfare will more than offset their earlier self-inflicted losses. Empirical evidence suggests that this result is true for any plausible range of discount rates. Copyright 1990 by the University of Chicago.

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  • Mantell, Edmund H, 1990. "The Relationship of Rent-Seeking Behavior to Impacted Information in Public Utility Regulation," The Journal of Business, University of Chicago Press, vol. 63(4), pages 525-536, October.
    • Handle: RePEc:ucp:jnlbus:v:63:y:1990:i:4:p:525-36
    DOI: 10.1086/296520
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