IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v199y2021ics0165176521000033.html
   My bibliography  Save this article

What determines the power of a regulatory regime?

Author

Listed:
  • Weisman, Dennis L.

Abstract

This paper derives a metric for the power of a regulatory regime (PRR) that is a function of the regulated firm’s share of profits, the ratchet effect and the Arrow effect. The power metric is non-monotonic in the earnings-sharing parameter when the regulator can affect prices ex post. An important finding, and a notable contrast with the literature, is that increased earnings sharing can increase both the regulated firm’s profits and the PRR.

Suggested Citation

  • Weisman, Dennis L., 2021. "What determines the power of a regulatory regime?," Economics Letters, Elsevier, vol. 199(C).
    • Handle: RePEc:eee:ecolet:v:199:y:2021:i:c:s0165176521000033
    DOI: 10.1016/j.econlet.2021.109726
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176521000033
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2021.109726?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, April.
    2. Kahn, Alfred E. & Tardiff, Timothy J. & Weisman, Dennis L., 1999. "The Telecommunications Act at three years: an economic evaluation of its implementation by the Federal Communications Commission," Information Economics and Policy, Elsevier, vol. 11(4), pages 319-365, December.
    3. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters, in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626, National Bureau of Economic Research, Inc.
    4. Cabral, Luis M B & Riordan, Michael H, 1989. "Incentives for Cost Reduction under Price Cap Regulation," Journal of Regulatory Economics, Springer, vol. 1(2), pages 93-102, June.
    5. Dennis L. Weisman, 2019. "The power of regulatory regimes reexamined," Journal of Regulatory Economics, Springer, vol. 56(2), pages 125-148, December.
    6. Weisman Dennis L., 2016. "What Do Regulators Value?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-10, October.
    7. Weisman Dennis L., 2016. "What Do Regulators Value?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-10, October.
    Full references (including those not matched with items on IDEAS)

    Citations

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


    Cited by:

    1. Pu‐yan Nie & Hong‐xing Wen & Chan Wang, 2023. "Price cap regulation under duopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(3), pages 1376-1382, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Dennis L. Weisman, 2019. "The power of regulatory regimes reexamined," Journal of Regulatory Economics, Springer, vol. 56(2), pages 125-148, December.
    2. Dennis L. Weisman, 2023. "Measuring the Power of Regulatory Regimes," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(1), pages 19-32, February.
    3. Paula Sarmento & António Brandão, 2007. "Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(1), pages 19-34, February.
    4. Giuseppe Coco & Claudio De Vincenti, 2002. "Can regulation increase firm's efficiency?," Working Papers in Public Economics 60, University of Rome La Sapienza, Department of Economics and Law.
    5. Coco, Giuseppe & De Vincenti, Claudio, 2008. "Optimal price-cap reviews," Utilities Policy, Elsevier, vol. 16(4), pages 238-244, December.
    6. Müller, Christine & Growitsch, Christian & Wissner, Matthias, 2010. "Regulierung und Investitionsanreize in der ökonomischen Theorie. IRIN Working Paper im Rahmen des Arbeitspakets: Smart Grid-gerechte Weiterentwicklung der Anreizregulierung," WIK Discussion Papers 349, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH.
    7. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    8. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    9. Galasso, Alberto & Mitchell, Matthew & Virag, Gabor, 2018. "A theory of grand innovation prizes," Research Policy, Elsevier, vol. 47(2), pages 343-362.
    10. Vogelsang, Ingo, 2000. "Regulation of Access to the Telecommunications Network of New Zealand: A Review of the Literature," Working Paper Series 3931, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    11. Paul Joskow & Roger Noll, 2013. "Alfred E. Kahn, 1917–2010," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 42(2), pages 107-126, March.
    12. Nykamp, Stefan & Andor, Mark & Hurink, Johann L., 2012. "‘Standard’ incentive regulation hinders the integration of renewable energy generation," Energy Policy, Elsevier, vol. 47(C), pages 222-237.
    13. Weisman, Dennis L., 2002. "Strategic sharing in regulatory regimes," Economics Letters, Elsevier, vol. 75(3), pages 361-367, May.
    14. T. Jamasb & R. Nepal, 2015. "Issues and Options in the Economic Regulation of European Network Security," Competition and Regulation in Network Industries, Intersentia, vol. 16(1), pages 2-23, March.
    15. Weisman, Dennis L., 2002. "Is there 'Hope' for price cap regulation?," Information Economics and Policy, Elsevier, vol. 14(3), pages 349-370, September.
    16. Marques, Vítor & Costa, Paulo Moisés & Bento, Nuno, 2022. "Greater than the sum: On regulating innovation in electricity distribution networks with externalities," Utilities Policy, Elsevier, vol. 79(C).
    17. Filippo Belloc, 2014. "Innovation in State-Owned Enterprises: Reconsidering the Conventional Wisdom," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(3), pages 821-848.
    18. Jan Boone & Jacob K. Goeree, 2010. "Optimal market design," IEW - Working Papers 479, Institute for Empirical Research in Economics - University of Zurich.
    19. Weisman Dennis L., 2016. "What Do Regulators Value?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(4), pages 1-10, October.
    20. Langinier, Corinne & Moschini, GianCarlo, 2002. "Economics of Patents: An Overview, The," Staff General Research Papers Archive 2061, Iowa State University, Department of Economics.

    More about this item

    Keywords

    Power of regulatory regimes; Price caps; Efficiency; Competitive entry;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

    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:eee:ecolet:v:199:y:2021:i:c:s0165176521000033. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    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.