In a recent issue of this journal, Woo (1990) suggests a mechanism to improve on a pricing scheme initially proposed by Panzar and Sibley (1978). In this paper, we analyze Woo's mechanism. Woo claims that by activating rationing fuses only when total demand reaches system capacity, the problem...

Using real options, we consider a firm that must undergo a costly and time-consuming regulatory process before making an irreversible, lagged investment whose value varies randomly. We apply our model to Hydro-Québec's proposal to build a 1,250 megawatts interconnection with Ontario. We find...