The paper provides a tractable, analytical framework to study regulatory risk under optimal incentive regulation …. Regulatory risk is captured by uncertainty about the policy variables in the regulator's objective function: weights attached to … profits and costs of public funds. Results are as follows: 1) The regulator's reaction to regulatory risk depends on the …

The paper provides a tractable, analytical framework to study regulatory risk. Regulatory risk is captured by … funds. Results are as follows: 1) The regulator's reaction to regulatory risk depends on the curvature of aggregate demand …. 2) It yields a positive information rent effect exactly when demand is convex. 3) Firms benefit from regulatory risk …

question about Q by estimating an endogenous growth model featuring realistic risk premia and markups. Our baseline estimates …