IDEAS home Printed from https://ideas.repec.org/a/rje/randje/v20y1989iautumnp405-416.html
   My bibliography  Save this article

Regulatory Options and Price-Cap Regulation

Author

Listed:
  • Tracy R. Lewis
  • David E.M. Sappington

Abstract

We construct a simple model of the regulatory process in which a monopoly firm has private information about its capabilities and its cost-reducing activities. The optimal regulatory policy offers the firm a choice between two regulatory regimes, one of which resembles price-cap regulation. The other regime has the firm share realized gains in surplus with consumers. We examine the optimal linking of the two regimes and show how the optimal regulatory policy varies with changes in the technological climate in the industry and with the nature of the information asymmetry between regulator and firm.

Suggested Citation

  • Tracy R. Lewis & David E.M. Sappington, 1989. "Regulatory Options and Price-Cap Regulation," RAND Journal of Economics, The RAND Corporation, vol. 20(3), pages 405-416, Autumn.
    • Handle: RePEc:rje:randje:v:20:y:1989:i:autumn:p:405-416
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0741-6261%28198923%2920%3A3%3C405%3AROAPR%3E2.0.CO%3B2-L&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

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

    Citations

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


    Cited by:

    1. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    2. Bernstein, Jeffrey I & Sappington, David E M, 1999. "Setting the X Factor in Price-Cap Regulation Plans," Journal of Regulatory Economics, Springer, vol. 16(1), pages 5-25, July.
    3. Larry Blank & John Mayo, 2009. "Endogenous Regulatory Constraints and the Emergence of Hybrid Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(3), pages 233-255, November.
    4. Philippe Gagnepain & Marc Ivaldi, 2002. "Incentive Regulatory Policies: The Case of Public Transit Systems in France," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 605-629, Winter.
    5. Josh Lerner, 2005. "150 Years of Patent Office Practice," American Law and Economics Review, American Law and Economics Association, vol. 7(1), pages 112-143.
    6. Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2009. "Technology and incentive regulation in the Italian motorways industry," Journal of Regulatory Economics, Springer, vol. 35(2), pages 201-221, April.
    7. Iossa, Elisabetta & Stroffolini, Francesca, 2002. "Price cap regulation and information acquisition," International Journal of Industrial Organization, Elsevier, vol. 20(7), pages 1013-1036, September.
    8. Noam Tanner, 2018. "Optimal Delegation Under Unknown Bias: The Role of Concavity," Supervisory Research and Analysis Working Papers RPA 18-1, Federal Reserve Bank of Boston.
    9. Erdogdu, Erkan, 2005. "Energy market reforms in Turkey: An economic analysis," MPRA Paper 26929, University Library of Munich, Germany.
    10. Enzo Defilippi, 2013. "X-factor estimation and controversies : the case of Lima´s airport," Working Papers 13-09, Centro de Investigación, Universidad del Pacífico.
    11. Stephen G. Donald & David E. M. Sappington, 1995. "Explaining the Choice Among Regulatory Plans in the U.S. Telecommunications Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(2), pages 237-265, June.
    12. Waters, II, W.G. & Tretheway, Michael W., 2000. "Labor Payouts, Productivity Measurement and the Price Cap Approach to Regulation," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 39(1).
    13. Defilippi, Enzo, 2015. "X-factor regulation in a developing country: The case of Lima's airport," Transport Policy, Elsevier, vol. 41(C), pages 16-22.
    14. Terry Robinson, 2006. "The Revealed Preference of Regulatory Menus: Evidence from the Pre-Nationalisation British Gas Industry," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(2), pages 213-221.
    15. Brennan, Timothy, 2000. "The Economics of Competition Policy: Recent Developments and Cautionary Notes in Antitrust and Regulation," RFF Working Paper Series dp-00-07, Resources for the Future.
    16. 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.

    More about this item

    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:rje:randje:v:20:y:1989:i:autumn:p:405-416. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    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.