Moretto, Michele; Panteghini, Paolo M.; Scarpa, Carlo - Dipartimento di Economia e Management, Università … - 2006
We analyse the effects of different regulatory schemes (price cap and profit sharing) on a firm's investment of endogenous size. Using a real option approach in continuous time, we show that profit sharing does not delay a firm's start-up investment relative to a pure price cap scheme. Profit...