Incentive Regulation and the Role of Convexity in Benchmarking Electricity Distribution: Economists versus Engineers
This note illustrates the potential impact of the specification of a convex production technology on establishing minimal costs compared to the use of a non-convex technology when benchmarking electricity distributors. This methodological reflection is mainly motivated by recent engineering literature providing evidence for non-convexities in electricity distribution. An empirical illustration using non-parametric specifications of technology illustrates this main point using a sample of Spanish electricity distribution firms earlier analysed in Grifell-Tatjé and Lovell (2003).
|Date of creation:||Oct 2007|
|Publication status:||Published in Annals of Public and Cooperative Economics, June 2008, 79(2), pp. 227-248|
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