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Social Contracts And Pipe Dreams

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  • JEROME ELLIG
  • JACK HIGH

Abstract

Economists' debate over the public utility “regulatory contract” has increasingly focused on three issues created by sunk costs: (i) Protection of sunk capital, (ii) Division of “windfalls” in a world of uncertainty, and (Hi) Mechanisms to control the regulator who administers long‐term agreements. This article uses these three criteria to evaluate regulatory alternatives in the natural gas industry. Facing similar problems under criteria 1 and 2 are: government regulation of pipelines as integrated gas merchants, government regulation of pipelines as gas transporters, and private regulation through competitive contracting. Private contracting, however, offers superior control over the contract administrator, because it removes the Federal Energy Regulatory Commission's monopoly on contract administration.

Suggested Citation

  • Jerome Ellig & Jack High, 1992. "Social Contracts And Pipe Dreams," Contemporary Economic Policy, Western Economic Association International, vol. 10(1), pages 39-51, January.
    • Handle: RePEc:bla:coecpo:v:10:y:1992:i:1:p:39-51
    DOI: 10.1111/j.1465-7287.1992.tb00210.x
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    References listed on IDEAS

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    Cited by:

    1. Stephen P. A. Brown & Mine K. Yücel, 1993. "The pricing of natural gas in U.S. markets," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Apr, pages 41-51.

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