search query: @all regulation / total: 2082
reference: 9 / 2082
| Author: | Strausz, R. |
| Title: | Regulatory risk under optimal monopoly regulation |
| Journal: | Economic Journal
2011 : JUN, VOL. 121:553 p. 740-762 |
| Index terms: | profit costs funds companies consumers |
| Language: | eng |
| Abstract: | A tractable framework is developed to study regulatory risk under optimal monopoly regulation. It captures increasing regulatory risk as mean-preserving spreads of two regulatory variables: weights attached to profits and costs of public funds. The regulator's reaction to regulatory risk depends on the curvature of demand. For convex (concave) demand, it yields a positive (negative) information rent effect which benefits (hurts) the company. Consumers dislike a positive information rent effect but their risk preferences also depend on their tendency to dislike fluctuations in consumption. Risk preference of benevolent regulations may contradict both those of the firm and consumers. |
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