search query: @indexterm time consistency / total: 10
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| Author: | Levine, P. Stern, J. Trillas, F. |
| Title: | Utility price regulation and time inconsistency: comparisons with monetary policy |
| Journal: | Oxford Economic Papers
2005 : JUL, VOL. 57:3, p. 447-478 |
| Index terms: | Monetary policy Prices Regulations Time consistency Utility theory |
| Language: | eng |
| Abstract: | The hold-up problem of price-regulation is examined and compared with the monetary policy credibility problem. For both, reputational solutions are possible provided that the policymaker is sufficiently far-sighted, but the hold-up problem in regulation turns out to be more serious than the inflation bias problem in monetary policy. Even with far-sighted regulators, a reputational equilibrium with optimal investment is undermined if capital depreciates slowly and consumer demand increases slowly. |
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