IDEAS home Printed from https://ideas.repec.org/a/eee/juipol/v57y2019icp67-74.html
   My bibliography  Save this article

Investor response to tariff options under regulation by contract: Evidence from Russian heating concessions

Author

Listed:
  • Avdasheva, Svetlana
  • Gimadi, Victoria

Abstract

Governments rarely provide a menu of tariff options for selection by regulated entities. There is a lack of systematic evidence on investor preferences towards different tariff setting. We use a dataset of concessions tenders in Russian heating during the 2014–2015 period to test hypotheses about the preferences of investors towards different tariff combinations. We found that long-term tariffs increase the attractiveness of a concession. While an increase in the price cap does not attract investors, an increase in the rate of return does. Investors make a choice in favor of tariffs with low-powered incentives.

Suggested Citation

  • Avdasheva, Svetlana & Gimadi, Victoria, 2019. "Investor response to tariff options under regulation by contract: Evidence from Russian heating concessions," Utilities Policy, Elsevier, vol. 57(C), pages 67-74.
    • Handle: RePEc:eee:juipol:v:57:y:2019:i:c:p:67-74
    DOI: 10.1016/j.jup.2019.02.004
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0957178718302881
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jup.2019.02.004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Korppoo, Anna & Korobova, Nina, 2012. "Modernizing residential heating in Russia: End-use practices, legal developments, and future prospects," Energy Policy, Elsevier, vol. 42(C), pages 213-220.
    2. Baranov, Alexey & Malkov, Egor & Polishchuk, Leonid & Rochlitz, Michael & Syunyaev, Georgiy, 2015. "How (not) to measure Russian regional institutions," Russian Journal of Economics, Elsevier, vol. 1(2), pages 154-181.
    3. Jensen, Olivia & Wu, Xun, 2017. "The hybrid model for economic regulation of water utilities: Mission impossible?," Utilities Policy, Elsevier, vol. 48(C), pages 122-131.
    4. Joskow, Paul L., 2007. "Regulation of Natural Monopoly," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 16, pages 1227-1348, Elsevier.
    5. Cabral, Luis M B & Riordan, Michael H, 1989. "Incentives for Cost Reduction under Price Cap Regulation," Journal of Regulatory Economics, Springer, vol. 1(2), pages 93-102, June.
    6. Paul H. Jensen & Robin E. Stonecash, 2005. "Incentives and the Efficiency of Public Sector‐outsourcing Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 767-787, December.
    7. Lev Freinkman & Andrei Yakovlev, 2015. "Institutional frameworks to support regulatory reform in middle-income economies: lessons from Russia's recent experience," Post-Communist Economies, Taylor & Francis Journals, vol. 27(3), pages 354-369, September.
    8. Ruiz Diaz, Gonzalo, 2017. "The contractual and administrative regulation of public-private partnership," Utilities Policy, Elsevier, vol. 48(C), pages 109-121.
    9. Maziotis, Alexandros & Saal, David S. & Thanassoulis, Emmanuel & Molinos-Senante, María, 2016. "Price-cap regulation in the English and Welsh water industry: A proposal for measuring productivity performance," Utilities Policy, Elsevier, vol. 41(C), pages 22-30.
    10. J. Luis Guasch & Stéphane Straub, 2006. "Renegotiation Of Infrastructure Concessions: An Overview," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 479-493, December.
    11. J. Guasch & Jean-Jacques Laffont & Stéphane Straub, 2006. "Renegotiation of Concession Contracts: A Theoretical Approach," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(1), pages 55-73, September.
    12. Pablo T. Spiller & Mariano Tommasi, 2008. "The Institutions of Regulation: An Application to Public Utilities," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 20, pages 515-543, Springer.
    13. Laffont, Jean-Jacques & Tirole, Jean, 1988. "The Dynamics of Incentive Contracts," Econometrica, Econometric Society, vol. 56(5), pages 1153-1175, September.
    14. Jean-Jacques Laffont & Jean Tirole, 1990. "Adverse Selection and Renegotiation in Procurement," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(4), pages 597-625.
    15. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    16. Moore, Mark A. & Boardman, Anthony E. & Vining, Aidan R., 2017. "Analyzing risk in PPP provision of utility services: A social welfare perspective," Utilities Policy, Elsevier, vol. 48(C), pages 210-218.
    17. Cécile Aubert & Arnaud Reynaud, 2005. "The Impact of Regulation on Cost Efficiency: An Empirical Analysis of Wisconsin Water Utilities," Journal of Productivity Analysis, Springer, vol. 23(3), pages 383-409, July.
    18. Mirrlees-Black, Jonathan, 2014. "Reflections on RPI-X regulation in OECD countries," Utilities Policy, Elsevier, vol. 31(C), pages 197-202.
    19. Zhang, Junli & Ge, Bin & Xu, Hongsheng, 2013. "An equivalent marginal cost-pricing model for the district heating market," Energy Policy, Elsevier, vol. 63(C), pages 1224-1232.
    20. von Hirschhausen, Christian & Beckers, Thorsten & Brenck, Andreas, 2004. "Infrastructure regulation and investment for the long-term--an introduction," Utilities Policy, Elsevier, vol. 12(4), pages 203-210, December.
    21. Oliver E. Williamson, 1976. "Franchise Bidding for Natural Monopolies -- in General and with Respect to CATV," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 73-104, Spring.
    22. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    23. Erbetta Fabrizio & Cave Martin, 2007. "Regulation and Efficiency Incentives: Evidence from the England and Wales Water and Sewerage Industry," Review of Network Economics, De Gruyter, vol. 6(4), pages 1-28, December.
    24. Marques, Rui Cunha, 2017. "Why not regulate PPPs?," Utilities Policy, Elsevier, vol. 48(C), pages 141-146.
    25. Alexander, Ian, 2014. "Developing countries experience and outlook: Getting the framework right," Utilities Policy, Elsevier, vol. 31(C), pages 184-187.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    2. Raffaele Fiocco & Roland Strausz, 2015. "Consumer Standards as a Strategic Device to Mitigate Ratchet Effects in Dynamic Regulation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(3), pages 550-569, September.
    3. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    4. Committee, Nobel Prize, 2014. "Market power and regulation (scientific background)," Nobel Prize in Economics documents 2014-2, Nobel Prize Committee.
    5. Roland Strausz, 2009. "Regulatory Risk under Optimal Incentive Regulation," SFB 649 Discussion Papers SFB649DP2009-006, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    6. Bester, Helmut & Strausz, Roland, 2007. "Contracting with imperfect commitment and noisy communication," Journal of Economic Theory, Elsevier, vol. 136(1), pages 236-259, September.
    7. Faure-Grimaud, Antoine & Reiche, Sönje Kerrin, 2003. "Dynamic Yardstick Regulation," CEPR Discussion Papers 4035, C.E.P.R. Discussion Papers.
    8. Worch, Hagen & Truffer, Bernhard & Kabinga, Mundia & Eberhard, Anton & Markard, Jochen, 2013. "A capability perspective on performance deficiencies in utility firms," Utilities Policy, Elsevier, vol. 25(C), pages 1-9.
    9. Battaglini, Marco, 2007. "Optimality and renegotiation in dynamic contracting," Games and Economic Behavior, Elsevier, vol. 60(2), pages 213-246, August.
    10. Tapas Kundu & Tore Nilssen, 2020. "Delegation of Regulation," Journal of Industrial Economics, Wiley Blackwell, vol. 68(3), pages 445-482, September.
    11. J. Luis Guasch & Jean-Jacques Laffont & Stéphane Straub, 2007. "Concessions of infrastructure in Latin America: Government-led renegotiation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1267-1294.
    12. Auriol, Emmanuelle & Picard, Pierre M., 2013. "A theory of BOT concession contracts," Journal of Economic Behavior & Organization, Elsevier, vol. 89(C), pages 187-209.
    13. Mika Kato, 2016. "Jean Tirole, Nobel Prize Winner," Review of Political Economy, Taylor & Francis Journals, vol. 28(1), pages 23-44, January.
    14. Endre Bjoerndal & Mette Bjoerndal & Astrid Cullmann & Maria Nieswand, 2016. "Finding the Right Yardstick: Regulation under Heterogeneous Environments," Discussion Papers of DIW Berlin 1555, DIW Berlin, German Institute for Economic Research.
    15. Neri, Marcelo Côrtes & Xerez, Marcelo, 2004. "Aspectos dinâmicos de um sistema de metas sociais," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 563, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    16. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
    17. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.
    18. Bjørndal, Endre & Bjørndal, Mette & Cullmann, Astrid & Nieswand, Maria, 2018. "Finding the right yardstick: Regulation of electricity networks under heterogeneous environments," European Journal of Operational Research, Elsevier, vol. 265(2), pages 710-722.
    19. Philippe Gagnepain, 2001. "La nouvelle théorie de la régulation des monopoles naturels : fondements et tests," Post-Print hal-00622947, HAL.
    20. Hao Zhang & Mahesh Nagarajan & Greys Sošić, 2010. "Dynamic Supplier Contracts Under Asymmetric Inventory Information," Operations Research, INFORMS, vol. 58(5), pages 1380-1397, October.

    More about this item

    Keywords

    Tariffs; Heating; Concession;
    All these keywords.

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:juipol:v:57:y:2019:i:c:p:67-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.sciencedirect.com/journal/utilities-policy .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.