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| Author: | Hawdon, D. (et al.) |
| Title: | Optimal sliding scale regulation: an application to regional electricity distribution in England and Wales |
| Journal: | Oxford Economic Papers
2007 : JUL, VOL. 59:3, p. 458-485 |
| Index terms: | electricity industry incentives monopoly regulations welfare |
| Language: | eng |
| Abstract: | This article analyzes the optimal price regulation of a monopoly in a situation in which productivity and managerial effort are not observed. A general way to operationalize this model is presented. Exploiting data from electricity distribution in England and Wales, the key parameters and welfare comparisons of sliding scale regulation are estimated. The latter is done with a stylized price cap regime and the full information case. With this approach the technical uncertainty can be quantified. The analysis show that notable welfare gains can be achieved from sliding scale relative to the stylized price cap regime. |
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