Strategic Behaviour under Regulation Benchmarking
AbstractLiberalisation of generation and supply activities in the electricity sectors is often followed by regulatory reform of distribution networks. In order to improve the efficiency of distribution utilities, some regulators have adopted incentive regulation schemes that rely on performance benchmarking. Although regulation benchmarking can influence the “regulation game”, the subject has received limited attention. This paper discusses how strategic behaviour can result in inefficient behaviour by firms. We also present a survey of issues encountered by electricity regulators. We then use the Data Envelopment Analysis (DEA) method with US utility data to examine implications of selected cases of strategic behaviour. The results show that gaming can have significant effects on the measured performance and profitability of firms.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0312.
Date of creation: Feb 2003
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gaming; strategic behaviour; regulation; benchmarking; electricity;
Find related papers by JEL classification:
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-18 (All new papers)
- NEP-COM-2003-02-18 (Industrial Competition)
- NEP-ENE-2003-02-18 (Energy Economics)
- NEP-IND-2003-02-20 (Industrial Organization)
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