haku: @author Lyon, Th. P. / yhteensä: 1
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| Tekijä: | Lyon, Th. P. |
| Otsikko: | Regulation with "20-20 hindsight": least-cost rules and variable costs |
| Lehti: | Journal of Industrial Economics
1992 : SEP, VOL. 40:3, p.277-289 |
| Asiasana: | REGULATIONS VARIABLE COSTING PRICES DECISION MAKING PURCHASING |
| Kieli: | eng |
| Tiivistelmä: | Regulators sometimes review a regulated firm's input decisions in retrospect (i.e. with "20-20 hindsight") and punish bad outcomes rather than bad decisions. When such practices are applied consistently to contracts for variable factors in a regime with profit regulation, the firm increases its capital stock and relies more heavily on spot market purchases for its variable inputs. The firm's profits are reduced, but welfare effects on consumers are ambiguous. If applied as a type of "stochastic price cap" regulation, however, hindsight review can induce variable input choices that minimize expected costs. Even in this type of regulatory environment the conditions for hindsight review to be enhancing efficiency are rather stringent. |
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