This paper shows how the cash flows received by an unregulated firm operating in a workably competitive market can be replicated for a regulated firm. The only change to standard regulatory practice is that each time the regulated firm invests, the amount added to its rate base is the product of...

This paper shows how the cash flows received by an unregulated firm operating in a workably competitive market can be replicated for a regulated firm. The only change to standard regulatory practice is that each time the regulated firm invests, the amount added to its rate base is the product of...

This paper shows how scale economies affect welfare-maximizing regulation and regulated firms' investment behavior. Price-regulated firms take less advantage of scale economies than social planners, with greater investment distortions for greater economies of scale. Price caps should be below...

Regulated firms are exposed to asset-stranding risk whenever allowed revenue depends on past capital expenditure: if demand falls far enough, past expenditure is unrecoverable. I show that such regulation induces firms to invest in more capital, but distorts the trade-off between investment...

Incentive regulation allows decentralised decision-making under regulatory parameters set on the basis of industry characteristics. When there is uncertainty, sunk costs, and flexibility in the timing of investment a monopoly will invest later than is socially desirable because it garners only a...

Interchange fees and related issues in payment card markets have been the focus of considerable attention recently. The academic community and public officials have begun to scrutinize these markets. Meanwhile, these markets continue to experience dynamic change as card payments account for an...