The Behaviour of the Firm under Alternative Regulatory Constraints

We review the case for intermediate power incentive regulation such as sliding scale when the regulator is badly informed and the firm's profits have a shadow resource cost. We then evaluate a number of different regulatory regimes including sliding scale in terms of productive and allocative e...

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Bibliographic Details
Published in:Scottish journal of political economy 1998-05, Vol.45 (2), p.133-157
Main Authors: Burns, Philip, Turvey, Ralph, Weyman-Jones, Thomas G.
Format: Article
Language:English
Subjects:
Asymmetric information
Economic efficiency
Economic models
Efficiency
Monopolies
Price level
Price regulation
Profit
Public utilities
Regulation
Studies
Uncertainty
Utilities
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Summary:We review the case for intermediate power incentive regulation such as sliding scale when the regulator is badly informed and the firm's profits have a shadow resource cost. We then evaluate a number of different regulatory regimes including sliding scale in terms of productive and allocative efficiency. We find that the sliding scale principle can be applied quite generally—to dividends, profits or rate of return and that it has attractive economic properties.
ISSN:0036-9292
1467-9485
DOI:10.1111/1467-9485.00086