EconPapers    
Economics at your fingertips  
 

Regulation with "20-20 Hindsight": Least-Cost Rules and Variable Costs

Thomas Lyon ()

Journal of Industrial Economics, 1992, vol. 40, issue 3, 277-89

Abstract: 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. Copyright 1992 by Blackwell Publishing Ltd.

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://links.jstor.org/sici?sici=0022-1821%2819920 ... 0.CO%3B2-K&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:bla:jindec:v:40:y:1992:i:3:p:277-89

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0022-1821

Access Statistics for this article

Journal of Industrial Economics is currently edited by Pierre Regibeau, Yeon-Koo Che, Kenneth Corts, Thomas Hubbard, Patrick Legros and Frank Verboven

More articles in Journal of Industrial Economics from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().

 
Page updated 2020-11-26
Handle: RePEc:bla:jindec:v:40:y:1992:i:3:p:277-89