The Incremental Surplus Subsidy and Rate-of-Return Regulation

Blackmon, B Glenn,

Journal of Regulatory Economics, 1992, vol. 4, issue 2, 187-96

Abstract: D. Sappington and D. Sibley (1988) propose an alternative regulatory mechanism, the Incremental Surplus Subsidy (ISS), that would induce the regulated firm to set price at marginal cost and eliminate all waste. The ISS would give the firm a subsidy equal to the one-period gain in consumer surplus resulting from its pricing decision. This article shows that the ISS does not induce greater production efficiency than traditional rate-of-return (ROR) regulation. The author proposes a "super-ISS" mechanism that would give the firm a subsidy greater than the gain in consumer surplus resulting from its pricing decisions. This super-ISS mechanism is shown to result in greater benefits than either ISS or ROR regulation. Copyright 1992 by Kluwer Academic Publishers

Date: 1992
References: Add references at CitEc
Citations: View citations in EconPapers (6)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:kap:regeco:v:4:y:1992:i:2:p:187-96

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 ().