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Price and Profit Regulation in Developing and Transition Economies, Methods Used and Problems Faced: A Survey of the Regulators

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  • Kirkpatrick, Colin
  • Parker, David
  • Zhang, Yin-Fang

Abstract

Rate of return or cost of service regulation was the traditional means by which governments, especially in the USA, regulated profitability and prices in privately-owned public utility businesses. However, rate of return regulation was associated with efficiency disincentives. Hence, in 1983 Professor Stephen Littlechild recommended the use of a price cap to regulate British Telecom when it was privatised. Price caps were later introduced for other privatised utilities in the UK, namely gas, airports, water, electricity and the railways. Similarly, other countries that privatised their utility sectors in the 1980s and 1990s often introduced price cap regimes. This paper reports the results of a questionnaire survey of the methods used to regulate profits and prices in privatised utility sectors in a sample of developing and transition economies. In addition to providing an insight into the different methods used in these economies, the questionnaire focuses on the difficulties that their regulators perceive in operating profit and price regulation regimes.

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Bibliographic Info

Paper provided by University of Manchester, Institute for Development Policy and Management (IDPM) in its series Centre on Regulation and Competition (CRC) Working papers with number 30596.

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Date of creation: 2004
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Handle: RePEc:ags:idpmcr:30596

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Related research

Keywords: developing economies; transition economies; regulation; rate of return; price cap.; Demand and Price Analysis;

References

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  1. Lyon, T.P., 1993. "A Model of Sliding-Scale Regulation," Papers 93-011, Indiana - Center for Econometric Model Research.
  2. Bawa, Vijay S & Sibley, David S, 1980. "Dynamic Behavior of a Firm Subject to Stochastic Regulatory Review," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 627-42, October.
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  4. Levy, Brian & Spiller, Pablo T, 1994. "The Institutional Foundations of Regulatory Commitment: A Comparative Analysis of Telecommunications Regulation," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 201-46, October.
  5. Alexander, Ian & Estache, Antonio & Oliveri, Adele, 2000. "A few things transport regulators should know about risk and the cost of capital," Utilities Policy, Elsevier, vol. 9(1), pages 1-13, March.
  6. Stern, Jon & Holder, Stuart, 1999. "Regulatory governance: criteria for assessing the performance of regulatory systems: An application to infrastructure industries in the developing countries of Asia," Utilities Policy, Elsevier, vol. 8(1), pages 33-50, March.
  7. Crew, Michael A & Kleindorfer, Paul R, 1996. "Incentive Regulation in the United Kingdom and the United States: Some Lessons," Journal of Regulatory Economics, Springer, vol. 9(3), pages 211-25, May.
  8. Alexander, Ian & Mayer, Colin & Weeds, Helen, 1996. "Regulatory structure and risk and infrastructure firms : an international comparison," Policy Research Working Paper Series 1698, The World Bank.
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  10. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
  11. Crew, Michael A & Kleindorfer, Paul R, 2002. "Regulatory Economics: Twenty Years of Progress?," Journal of Regulatory Economics, Springer, vol. 21(1), pages 5-22, January.
  12. Kridel, Donald J & Sappington, David E M & Weisman, Dennis L, 1996. "The Effects of Incentive Regulation in the Telecommunications Industry: A Survey," Journal of Regulatory Economics, Springer, vol. 9(3), pages 269-306, May.
  13. Colin Mayer & John Vickers, 1996. "Profit-sharing regulation: an economic appraisal," Fiscal Studies, Institute for Fiscal Studies, vol. 17(1), pages 1-18, February.
  14. David Parker & Colin Kirkpatrick, 2005. "Privatisation in Developing Countries: A Review of the Evidence and the Policy Lessons," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 513-541.
  15. Iossa, Elisabetta & Stroffolini, Francesca, 2002. "Price cap regulation and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 1013-1036, September.
  16. Ian Alexander & Timothy Irwin, 1997. "Price Caps, Rate-of-Return Regulation, and the Cost of Capital," World Bank Other Operational Studies 11575, The World Bank.
  17. Preetum Domah & Pollitt, M.G. & Jon Stern, 2002. "Modelling the Costs of Electricity Regulation: Evidence of Human Resource Constraints in Developing Countries," Cambridge Working Papers in Economics 0229, Faculty of Economics, University of Cambridge.
  18. Antonio Estache & J.L. Guasch & Lourdes Trujillo, 2003. "Price caps, efficiency pay-offs and infrastructure contract renegotiation in Latin America," ULB Institutional Repository 2013/44100, ULB -- Universite Libre de Bruxelles.
  19. Carino, Ledivina V., 2002. "Regulatory Governance in the Philippines: A Profile," Centre on Regulation and Competition (CRC) Working papers 30624, University of Manchester, Institute for Development Policy and Management (IDPM).
  20. Aryeetey, Ernest, 2002. "The Institutional and Policy Framework for Regulation and Competition in Ghana," Centre on Regulation and Competition (CRC) Working papers 30641, University of Manchester, Institute for Development Policy and Management (IDPM).
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Cited by:
  1. Lantz, Björn, 2008. "Hybrid revenue caps and incentive regulation," Energy Economics, Elsevier, vol. 30(3), pages 688-695, May.
  2. Kirkpatrick, Colin & Parker, David, 2004. "Regulation and the Privatisation of Water Services in Developing Countries: Assessing the Impact of the General Agreement on Trade in Services (GATS)," Centre on Regulation and Competition (CRC) Working papers 30600, University of Manchester, Institute for Development Policy and Management (IDPM).

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