Utility Regulation and Risk Allocation: The Roles of Marginal Cost Pricing and Futures Markets

Simon Cowan

Journal of Regulatory Economics, 2004, vol. 26, issue 1, 23-40

Abstract: The effects on consumer welfare of requiring a utility facing cost or demand risk to use either a fixed retail price or marginal cost pricing are assessed. With marginal cost pricing and cost volatility an efficient futures market allows consumer welfare to be at least as high in every state as with the fixed price. With demand risk marginal cost pricing can benefit the consumer in every state without harming the firm if the profit difference is transferred to the consumer. A futures market can act as a partial replacement for the transfer.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://journals.kluweronline.com/issn/0922-680X/contents (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Utility Regulation and Risk Allocation: The Roles of Marginal Cost Pricing and Futures Markets (2002)
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:kap:regeco:v:26:y:2004:i:1:p:23-40

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11149/PS2

Access Statistics for this article

Journal of Regulatory Economics is currently edited by Menaham Spiegel

More articles in Journal of Regulatory Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().