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Electric Grid Investment under a Contract Network Regime


  • Bushnell, James B
  • Stoft, Steven E


This paper analyzes the incentives for electric grid investment that result from various proposed transmission network property regimes. In particular, we focus on "transmission congestion contracts" within a contract network regime such as proposed by William Hogan. We formalize a rule for awarding these new property rights to investors and show that, under certain conditions, this contract network approach can effectively deter detrimental investments, some of which are encouraged under other regimes. However, when these conditions are not met, market participants may still find it profitable to undertake network alterations which are detrimental to the network as a whole. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Bushnell, James B & Stoft, Steven E, 1996. "Electric Grid Investment under a Contract Network Regime," Journal of Regulatory Economics, Springer, vol. 10(1), pages 61-79, July.
  • Handle: RePEc:kap:regeco:v:10:y:1996:i:1:p:61-79

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    References listed on IDEAS

    1. Richard K. Harper & Stephen C. Adams, 1996. "Cercla And Deep Pockets: Market Response To The Superfund Program," Contemporary Economic Policy, Western Economic Association International, vol. 14(1), pages 107-115, January.
    2. Shreekant Gupta & George Van Houtven & Maureen Cropper, 1996. "Paying for Permanence: An Economic Analysis of EPA's Cleanup Decisions at Superfund Sites," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 563-582, Autumn.
    3. Viscusi, W. Kip, 1996. "Fatal Tradeoffs: Public and Private Responsibilities for Risk," OUP Catalogue, Oxford University Press, number 9780195102932.
    4. Tom H. Tietenberg, 1989. "Indivisible Toxic Torts: The Economics of Joint and Several Liability," Land Economics, University of Wisconsin Press, vol. 65(4), pages 305-319.
    5. Cropper, Maureen L. & William N. Evans & Stephen J. Berard & Maria M. Ducla-Soares & Paul R. Portney, 1992. "The Determinants of Pesticide Regulation: A Statistical Analysis of EPA Decision Making," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 175-197, February.
    6. Ringleb, Al H & Wiggins, Steven N, 1990. "Liability and Large-Scale, Long-term Hazards," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 574-595, June.
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