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Determinants of the Requested Rate of Return and the Rate of Return Granted in a Formal Regulatory Process

Author

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  • R. Blaine Roberts
  • G.S. Maddala
  • Gregory Enholm

Abstract

This paper contains further analysis of the questions discussed in two papers by Joskow concerning what rate of return a regulated firm will request and what rate of return it will be granted in a formal regulatory process. Using Florida data, this paper extends Joskow's approach by examining both the selectivity and the simultaneity of the rate of return requested and the rate of return granted. Both a "probit two-stage least squares" and a "tobit two-stage least squares" model are estimated and the results differ significantly from the OLS estimates.

Suggested Citation

  • R. Blaine Roberts & G.S. Maddala & Gregory Enholm, 1978. "Determinants of the Requested Rate of Return and the Rate of Return Granted in a Formal Regulatory Process," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 611-621, Autumn.
    • Handle: RePEc:rje:bellje:v:9:y:1978:i:autumn:p:611-621
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    Cited by:

    1. Wayne Y. Lee & Anjan V. Thakor, 2004. "Regulatory Pricing and Capital Investment under Asymmetric Information about Cost," Finance 0411022, University Library of Munich, Germany.
    2. Adam Fremeth & Guy Holburn & Pablo Spiller, 2014. "The impact of consumer advocates on regulatory policy in the electric utility sector," Public Choice, Springer, vol. 161(1), pages 157-181, October.
    3. Takalo, Tuomas & Tanayama, Tanja & Toivanen, Otto, 2008. "Evaluating innovation policy: a structural treatment effect model of R&D subsidies," Bank of Finland Research Discussion Papers 7/2008, Bank of Finland.
    4. Wayne Y. Lee & Anjan V. Thakor, 1982. "Optimal Regulatory Pricing Under Asymmetric Cost Information," Discussion Papers 580, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Stephen Littlechild, 2006. "Stipulations, the consumer advocate and utility regulation in Florida+," Working Papers EPRG 0615, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    6. Graeme Guthrie, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Journal of Economic Literature, American Economic Association, vol. 44(4), pages 925-972, December.
    7. David P. Baron & Raymond R. De Bondt, 1980. "Factor Price Changes," Discussion Papers 417, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Chakravorty, Shourjo, 2020. "The association between a regulated utility's allowed revenue increase and future operating cost: Some evidence from Florida," Utilities Policy, Elsevier, vol. 64(C).
    9. White, Fred C. & Araji, A.A., 1990. "An Analysis Of Experiment Station Funding Decisions," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 15(2), pages 1-9, December.
    10. Rode, David C. & Fischbeck, Paul S., 2019. "Regulated equity returns: A puzzle," Energy Policy, Elsevier, vol. 133(C).
    11. Takalo, Tuomas & Tanayama, Tanja & Toivanen, Otto, 2008. "Evaluating innovation policy : a structural treatment effect model of R&D subsidies," Research Discussion Papers 7/2008, Bank of Finland.
    12. repec:zbw:bofrdp:2008_007 is not listed on IDEAS
    13. Tuomas Takalo & Tanja Tanayama & Otto Toivanen, 2005. "Selection Or Self-Rejection? Applications Into A Treatment," Industrial Organization 0510002, University Library of Munich, Germany.
    14. Fremeth, Adam R. & Holburn, Guy L. F. & Piazza, Alessandro, 2021. "Activist Protest Spillovers into the Regulatory Domain: Theory and Evidence from the U.S. Nuclear Power Generation Industry," OSF Preprints s39h2, Center for Open Science.
    15. repec:vuw:vuwscr:18946 is not listed on IDEAS
    16. Guthrie, Graeme, 2006. "Regulating Infrastructure: The Impact on Risk and Investment," Working Paper Series 18946, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.

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