Optimal regulation of lumpy investments

Gijsbert Zwart and Peter Broer

No 214, CPB Discussion Paper from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We study optimal timing of regulated investment in a real options setting, in which the regulated monopolist has private information on investment costs. In solving the ensuing agency problem, the regulator trades off investment timing inefficiency against the dead-weight loss arising from high price caps. We show that optimal regulation is implemented by a price cap that decreases as a function of the monopolist's chosen investment time.

JEL-codes: D81 D82 L51 (search for similar items in EconPapers)
Date: 2012-07
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Optimal regulation of lumpy investments (2013)
Working Paper: Optimal Regulation of Lumpy Investments (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cpb:discus:214

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