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Incentive regulation: expectations, surprises, and the road forward

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  • Cave, Martin

Abstract

Forty years have passed since an inflation-adjusted price cap, widely called RPI-X, was proposed as a way of controlling prices in the UK’s newly privatised monopoly telecommunications company by a form of incentive regulation. The paper traces developments since then in several jurisdictions, within the context of a wider field of changing regulatory governance involving legislatures and governments as well as regulatory agencies. The focus is on, first, the experience of increasing complexity of the incentive schemes adopted, and second on the growing political salience of regulatory decisions which adds goals such as net zero, with more direct quantitative targets, to maximising consumer welfare. The implications of these changes for regulatory interventions are considered.

Suggested Citation

  • Cave, Martin, 2024. "Incentive regulation: expectations, surprises, and the road forward," LSE Research Online Documents on Economics 124579, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:124579
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    File URL: http://eprints.lse.ac.uk/124579/
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    References listed on IDEAS

    as
    1. David Sappington & Dennis Weisman, 2010. "Price cap regulation: what have we learned from 25 years of experience in the telecommunications industry?," Journal of Regulatory Economics, Springer, vol. 38(3), pages 227-257, December.
    2. Cave, Martin, 2023. "The achievement of digitalisation in the EU and its reliance on gigabit connectivity," Telecommunications Policy, Elsevier, vol. 47(9).
    3. 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.
    4. 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.
    5. 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.
    6. David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
    7. repec:vuw:vuwscr:18946 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    incentive regulation; network price caps; competition in networks;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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