Simple regulatory policies in the presence of demand and cost uncertainty

Journal Article (Journal Article)

We analyze the design of regulatory policy in the presence of demand uncertainty when the regulated firm has superior knowledge of its cost structure. The presence of demand uncertainty introduces important new considerations for the regulator. We show that by limiting the regulated firm's obligation to serve and by protecting the firm against stranded investment, the regulator can enhance consumer welfare relative to the case where the regulator can only set a single price for the regulated product before demand is realized. © 1995.

Full Text

Duke Authors

Cited Authors

  • Blair, BF; Lewis, TR; Sappington, DEM

Published Date

  • January 1, 1995

Published In

Volume / Issue

  • 7 / 1

Start / End Page

  • 57 - 73

International Standard Serial Number (ISSN)

  • 0167-6245

Digital Object Identifier (DOI)

  • 10.1016/0167-6245(94)00030-A

Citation Source

  • Scopus