Cournot Competition with Stranded Costs

José Antonio García Martín

Working Papers from CEMFI

Abstract: Recovery of stranded costs is perhaps the most litigious issue encountering regulators in promoting competition in United States and European utility industries. We build a dynamic model of Cournot competition which takes into account a particular regulatory mechanism regularly employed in United States and also in Spain for settling stranded costs payments, the competitive transition charges (CTC). Our results establish the conditions under which we are able to show that efficient competition and stranded costs recovery are not necessarily incompatible. Mechanism design is the key element in welfare analysis outcomes. Under ideal conditions we can prove that SCR payments can be used as a versatile regulatory tool to encourage competition and achieve allocative efficiency. On the contrary we also demonstrate that an unappropriated design of the SCR mechanism may deliver productive inefficiency in the market and delay or prevent desired new competition.

Date: 2001
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cemfi.es/ftp/wp/0107.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cmf:wpaper:wp2001_0107

Access Statistics for this paper

More papers in Working Papers from CEMFI Contact information at EDIRC.
Bibliographic data for series maintained by Araceli Requerey ().