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Setting the X Factor in Price-Cap Regulation Plans Author info | Abstract | Publisher info | Download info | Related research | Statistics Bernstein, Jeffrey I
Sappington, David E M
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Despite the popularity of price-cap regulation in practice, the economic literature provides limited guidance on how to determine the X factor, which is the rate at which inflation-adjusted output prices must fall under price-cap plans. We review the relevant basic principles, and then determine how to set the X factor: (1) when only a subset of the firm's products are subject to price-cap regulation, and when product-specific costs and productivity cannot be measured; (2) when changes in regulated prices affect the economy-wide inflation rate; and (3) in the presence of such structural changes as strengthened competitive forces. Copyright 1999 by Kluwer Academic Publishers
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Article provided by Springer in its journal Journal of Regulatory Economics .
Volume (Year): 16 (1999)
Issue (Month): 1 (July)
Pages: 5-25
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Handle: RePEc:kap:regeco:v:16:y:1999:i:1:p:5-25Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100298
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