Strategic Behaviour under Regulation Benchmarking

Tooraj Jamasb, Paul Nillesen and Michael Pollitt

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Liberalisation of generation and supply activities in the electricity sectors is often followed by regulatory reform of distribution networks. In order to improve the efficiency of distribution utilities, some regulators have adopted incentive regulation schemes that rely on performance benchmarking. Although regulation benchmarking can influence the “regulation game”, the subject has received limited attention. This paper discusses how strategic behaviour can result in inefficient behaviour by firms. We also present a survey of issues encountered by electricity regulators. We then use the Data Envelopment Analysis (DEA) method with US utility data to examine implications of selected cases of strategic behaviour. The results show that gaming can have significant effects on the measured performance and profitability of firms.

Keywords: gaming; strategic behaviour; regulation; benchmarking; electricity (search for similar items in EconPapers)
JEL-codes: L94 (search for similar items in EconPapers)
Pages: 28
Date: 2003-02
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
Note: CMI IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Strategic behaviour under regulation benchmarking (2003)
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