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Regulation of two-part tariffs and quality choice under uncertainty

  • Achim I. Czerny


    (Workgroup for Infrastructure Policy (WIP), Technische Universit├Ąt Berlin)

  • Kay Mitusch


    (Workgroup for Infrastructure Policy (WIP), Technische Universit├Ąt Berlin)

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    Many utilities are regulated with respect to prices and quality, and there is uncertainty about market conditions when regulation is chosen. We consider four different regulation regimes, based on two-part tariffs: A cap on the fixed fee is combined with either (i) quantity and quality standards, (ii) price and quality standards, (iii) price standards and quality bonuses, or (iv) quantity standards and quality bonuses. It turns out that there is a clear ranking of the four regimes in terms of expected welfare. The best results are obtained by regime (iv) with fixed fee caps, quantity standards, and quality bonuses.

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    File Function: Revised version, 1998
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    Paper provided by Center for Network Industries and Infrastructure (CNI) in its series Working Papers with number 2007-04.

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    Length: 32 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:cni:wpaper:2007-01
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