IDEAS home Printed from https://ideas.repec.org/p/hal/journl/halshs-01516947.html

Commitment in utility regulation: A model of reputation and policy applications

Author

Listed:
  • Liam Wren-Lewis

    (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles)

Abstract

This paper builds a dynamic model of utility regulation where a government cannot commit to a time-inconsistent policy ofnot expropriating investment. By allowing the government's type to change over time, I explore how reputation concerns may generate partial commitent. Restricting attention to equilibria that are strongly renegotiation proof, I show that there is a unique perfect Bayesian equilibrium. This contains episodes of investment and good behaviour followed by periods of expropriation and non-investment. I then apply the model to consider how the power of the incentive scheme and decentralization may influence the properties of this equilibrium. In the case of the power of incentives, the model suggests that price-caps may worsen commitment in developing countries, but not in developed ones. Similarly, the model suggests that decentralisation is likely to have a significant effect on commitment, but that this effect will depend on the general ability of the government to commit. Overall, we conclude that the effect of such policies on commitment will be different across countries, depending on the institutional environment.

Suggested Citation

  • Liam Wren-Lewis, 2013. "Commitment in utility regulation: A model of reputation and policy applications," Post-Print halshs-01516947, HAL.
    • Handle: RePEc:hal:journl:halshs-01516947
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a
    for a similarly titled item that would be available.

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stéphane Saussier, 2013. "Public–private partnerships," Post-Print halshs-01897404, HAL.
    2. Chen, An & Chen, Yusha & Nguyen, Thai & Uddin, Gazi Salah, 2025. "Goal-oriented preferences for green bonds: A model of sustainable investment strategies," Economic Modelling, Elsevier, vol. 150(C).
    3. Zhou, Xi & Chen, Shou, 2021. "FinTech innovation regulation based on reputation theory with the participation of new media," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    4. Antonio Estache & Tomas Serebrisky & Liam Wren-Lewis, 2015. "Financing infrastructure in developing countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 31(3-4), pages 279-304.
    5. Wren-Lewis, Liam, 2014. "Utility regulation in Africa: How relevant is the British model?," Utilities Policy, Elsevier, vol. 31(C), pages 203-205.

    More about this item

    Keywords

    ;
    ;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

    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:hal:journl:halshs-01516947. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.