Regulatory instruments have long been understood to have a powerful effect on investment, and part of the motivation for introducing higher-powered regulatory regimes and contracts was to reduce incentives for inefficiency and over-investment (gold plating) inherent in cost-plus regulatory schemes. In practice, the mix of incentives and the institutional framework that make up a higher-powered regulatory regime can also lead to unintended distortions on investment behavior. The authors examine the key drivers of investment behavior and provide some examples of how these drivers have affected investment in practice. They conclude with a set of key areas and interrelationships that are at the core of a regulatory settlement, and therefore need to be designed appropriately to drive efficient investment behavior.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.