IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Incentive Regulation, Investments and Technological Change

  • Ingo Vogelsang

Based on an idiosyncratic reading of the literature I propose intermediate (rather than tight or soft) regulation for balancing investment incentives with allocative efficiency and competition objectives. Intermediate regulation is compatible with incentive regulation and helps lengthening the regulatory commitment period necessary for incentives. However, such commitment for the whole time horizon of infrastructure or innovation investments is impossible. The compatibility of incentive regulation and efficient investment is thus in doubt. Incentive regulation for regular infrastructure investments therefore needs periodic updating based on rate-of-return regulation criteria. Innovative infrastructure investments may warrant regulatory holidays, which should be conditioned on strict criteria.

If you experience problems downloading a file, check if you have the proper application to view it first. 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.

File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-02/cesifo1_wp2964.pdf
Download Restriction: no

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2964.

as
in new window

Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:ces:ceswps:_2964
Contact details of provider: Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Joshua Gans & Stephen King, 2003. "Access Holidays for Network Infrastructure Investment," Monash Economics Working Papers archive-39, Monash University, Department of Economics.
  3. Vogelsang, Ingo, 2002. "Incentive Regulation and Competition in Public Utility Markets: A 20-Year Perspective," Journal of Regulatory Economics, Springer, vol. 22(1), pages 5-27, July.
  4. Bourreau, Marc & Dogan, Pinar, 2005. "Unbundling the local loop," European Economic Review, Elsevier, vol. 49(1), pages 173-199, January.
  5. Roques, Fabien A., 2008. "Market design for generation adequacy: Healing causes rather than symptoms," Utilities Policy, Elsevier, vol. 16(3), pages 171-183, September.
  6. Marc Bourreau & Pinar Dogan, 2006. ""Build-or-Buy" Strategies in the Local Loop," American Economic Review, American Economic Association, vol. 96(2), pages 72-76, May.
  7. David Mandy, 2009. "Pricing inputs to induce efficient Make-or-Buy decisions," Journal of Regulatory Economics, Springer, vol. 36(1), pages 29-43, August.
  8. Balazs Egert, 2009. "Infrastructure Investment in Network Industries: The Role of Incentive Regulation and Regulatory Independence," CESifo Working Paper Series 2642, CESifo Group Munich.
  9. Evans, Joanne & Levine, Paul & Trillas, Francesc, 2008. "Lobbies, delegation and the under-investment problem in regulation," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 17-40, January.
  10. 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.
  11. Kotakorpi, Kaisa, 2006. "Access price regulation, investment and entry in telecommunications," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 1013-1020, September.
  12. repec:rne:rneart:v:6:y:2007:i:3:p:274-298 is not listed on IDEAS
  13. Elizabeth E. Bailey & Roger D. Coleman, 1971. "The Effect of Lagged Regulation in an Averch-Johnson Model," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 278-292, Spring.
  14. Joskov, Paul L & MacAvoy, Paul W, 1975. "Regulation and the Financial Condition of the Electric Power Companies in the 1970's," American Economic Review, American Economic Association, vol. 65(2), pages 295-301, May.
  15. Michał Grajek & Lars-Hendrik Röller, 2009. "Regulation and Investment in Network Industries: Evidence from European Telecoms," SFB 649 Discussion Papers SFB649DP2009-039, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  16. Cave, Martin & Vogelsang, Ingo, 0. "How access pricing and entry interact," Telecommunications Policy, Elsevier, vol. 27(10-11), pages 717-727, November.
  17. Jörg Borrmann & Gert Brunekreeft, 2011. "The Effect of Monopoly Regulation on the Timing of Investment," Bremen Energy Working Papers 0009, Bremer Energie Institut.
  18. Vogelsang, Ingo, 2001. "Price Regulation for Independent Transmission Companies," Journal of Regulatory Economics, Springer, vol. 20(2), pages 141-65, September.
  19. Bawa, Vijay S & Sibley, David S, 1980. "Dynamic Behavior of a Firm Subject to Stochastic Regulatory Review," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(3), pages 627-42, October.
  20. Ai, Chunrong & Sappington, David E M, 2002. "The Impact of State Incentive Regulation on the U.S. Telecommunications Industry," Journal of Regulatory Economics, Springer, vol. 22(2), pages 133-59, September.
  21. Bourreau, Marc & Dogan, Pinar, 2004. "Service-based vs. facility-based competition in local access networks," Information Economics and Policy, Elsevier, vol. 16(2), pages 287-306, June.
  22. Ingo Vogelsang, 2006. "Electricity Transmission Pricing and Performance-based Regulation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 97-126.
  23. Evans, Lewis & Guthrie, Graeme, 2005. "Risk, Price Regulation, and Irreversible Investment," Working Paper Series 3880, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
  24. Paolo M. Panteghini & Carlo Scarpa, 2003. "Irreversible Investments and Regulatory Risk," CESifo Working Paper Series 934, CESifo Group Munich.
  25. Baake, Pio & Kamecke, Ulrich & Wey, Christian, 2005. "A Regulatory Framework for New and Emerging Markets," MPRA Paper 2518, University Library of Munich, Germany.
  26. Hori, Keiichi & Mizuno, Keizo, 2006. "Access pricing and investment with stochastically growing demand," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 795-808, July.
  27. Greenstein, Shane & McMaster, Susan & Spiller, Pablo T, 1995. "The Effect of Incentive Regulation on Infrastructure Modernization: Local Exchange Companies' Deployment of Digital Technology," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 187-236, Summer.
  28. Roques, Fabien A. & Savva, Nicos, 2009. "Investment under uncertainty with price ceilings in oligopolies," Journal of Economic Dynamics and Control, Elsevier, vol. 33(2), pages 507-524, February.
  29. Moretto, Michele & Panteghini, Paolo M. & Scarpa, Carlo, 2008. "Profit sharing and investment by regulated utilities: A welfare analysis," Review of Financial Economics, Elsevier, vol. 17(4), pages 315-337, December.
  30. Guthrie, Graeme, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Working Paper Series 3851, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
  31. Spiller, Pablo T, 1996. "Institutions and Commitment," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 421-52.
  32. Keiichi Hori & Keizo Mizuno, 2009. "Competition schemes and investment in network infrastructure under uncertainty," Journal of Regulatory Economics, Springer, vol. 35(2), pages 179-200, April.
  33. Jerry A. Hausman, 1997. "Valuing the Effect of Regulation on New Services in Telecommunications," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 1-54.
  34. Ingo Vogelsang & Jorg Finsinger, 1979. "A Regulatory Adjustment Process for Optimal Pricing by Multiproduct Monopoly Firms," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 157-171, Spring.
  35. Evans, Lewis & Garber, Steven, 1988. "Public-Utility Regulators Are Only Human: A Positive Theory of Rational Constraints," American Economic Review, American Economic Association, vol. 78(3), pages 444-62, June.
  36. Weisman, Dennis L., 2005. "Price regulation and quality," Information Economics and Policy, Elsevier, vol. 17(2), pages 165-174, March.
  37. William J. Baumol & Alvin K. Klevorick, 1970. "Input Choices and Rate-of Return Regulation: An Overview of the Discussion," Bell Journal of Economics, The RAND Corporation, vol. 1(2), pages 162-190, Autumn.
  38. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
  39. Fernando Camacho & Flavio Menezes, 2009. "Access pricing and investment: a real options approach," Journal of Regulatory Economics, Springer, vol. 36(2), pages 107-126, October.
  40. Baron, David P & Besanko, David, 1987. "Commitment and Fairness in a Dynamic Regulatory Relationship," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 413-36, July.
  41. Lewis Evans & Graeme Guthrie, 2006. "Incentive Regulation of Prices When Costs are Sunk," Journal of Regulatory Economics, Springer, vol. 29(3), pages 239-264, 05.
  42. Joshua S. Gans & Stephen P. King, 2004. "Access Holidays and the Timing of Infrastructure Investment," The Economic Record, The Economic Society of Australia, vol. 80(248), pages 89-100, 03.
  43. Evans, Lewis & Guthrie, Graeme, 2006. "Incentive Regulation of Prices when Costs are Sunk," Working Paper Series 3875, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
  44. Tracy R. Lewis & Huseyin Yildirim, 2002. "Learning by Doing and Dynamic Regulation," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 22-36, Spring.
  45. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, June.
  46. Mark Armstrong & David E.M. Sappington, 2006. "Regulation, Competition and Liberalization," Journal of Economic Literature, American Economic Association, vol. 44(2), pages 325-366, June.
  47. Faulhaber, Gerald R., 2003. "Policy-induced competition: the telecommunications experiments," Information Economics and Policy, Elsevier, vol. 15(1), pages 73-97, March.
  48. Richard J. Gilbert & David M. Newbery, 1994. "The Dynamic Efficiency of Regulatory Constitutions," RAND Journal of Economics, The RAND Corporation, vol. 25(4), pages 538-554, Winter.
  49. Roques, F.A. & Savva , N.S., 2006. "Price Cap Regulation and Investment Incentives under Demand Uncertainty," Cambridge Working Papers in Economics 0636, Faculty of Economics, University of Cambridge.
  50. Evans, Lewis T. & Guthrie, Graeme A., 2005. "Risk, price regulation, and irreversible investment," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 109-128, February.
  51. 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, June.
  52. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
  53. Gans, Joshua S, 2001. "Regulating Private Infrastructure Investment: Optimal Pricing for Access to Essential Facilities," Journal of Regulatory Economics, Springer, vol. 20(2), pages 167-89, September.
  54. Liston, Catherine, 1993. "Price-Cap versus Rate-of-Return Regulation," Journal of Regulatory Economics, Springer, vol. 5(1), pages 25-48, March.
  55. Joel Sobel, 1999. "A Reexamination of Yardstick Competition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(1), pages 33-60, 03.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_2964. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.