The Behaviour of the Firm under Alternative Regulatory Constraints.

The authors review the case for intermediate power incentive regulation, such as sliding scale, when the regulator is badly informed and the firm's profits have a shadow resource cost. They then evaluate a number of different regulatory regimes, including sliding scale, in terms of productive and allocative efficiency. The authors find the sliding scale principle can be applied quite generally--to dividends, profits, or rate of return--and that it has attractive economic properties. Copyright 1998 by Scottish Economic Society.