Tradeoffs in the Power of Regulatory Regimes

Weisman Dennis L. ()
Additional contact information
Weisman Dennis L.: Department of Economics, Kansas State University, Waters Hall, Manhattan, KS 66506-4001, USA

The B.E. Journal of Economic Analysis & Policy, 2024, vol. 24, issue 2, 339-359

Abstract: Performance-based regulation (PBR) has recently experienced increased popularity in North America and Europe. The genesis for this renewed interest in PBR is the potential to strengthen the regulated firm’s incentives for efficiency relative to traditional rate-of-return regulation. The strength of these incentives is referred to as the power of the regulatory regime (PRR). The PRR depends on the share of the efficiency gains retained by the regulated firm and the length of time that it retains them before being appropriated by the regulator acting as a surrogate for competition. Nonetheless, there are tradeoffs in the design of PBR plans that can render it inferior to traditional earning-based regulation in terms of incentive power. This may explain why the empirical evidence on the performance of PBR is best characterized as “mixed.”

Keywords: power of regulatory regimes; price caps; ratchet effect; earnings sharing; efficiency (search for similar items in EconPapers)
JEL-codes: L51 L96 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/bejeap-2023-0244 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

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:bpj:bejeap:v:24:y:2024:i:2:p:339-359:n:10

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.1515/bejeap-2023-0244

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().