RAND Journal of Economics
Опубликовано на портале: 25-12-2003Richard J. Gilbert, David M.G. Newbery RAND Journal of Economics. 1994. Vol. 25. No. 4. P. 538-554.
In this article, we model regulation as a repeated game between a utility facing a random sequence of demands and a regulator tempted to underreward past investment. Rate-of-return regulation designed with a constitutional commitment to an adequate rate of return on capital prudently invested is able to support an efficient investment program as a subgame-perfect Nash equilibrium for a larger set of parameter values than rate-of-return regulation without such a commitment. Furthermore, rate-of-return regulation is superior to price regulation according to the same criterion, assuming that the regulator is unable to make state-contingent transfer payments.