Abstract
Price-cap regulation (PCR) is an alternative to rate-of-return regulation (RORR) that has received a great deal of attention during the last decade as a means for providing incentives for cost reduction. It was first proposed by Littlechild (1983) and is in use in regulating British Telecom. PCR plans have been adopted by the FCC and various states. There has been substantial analysis of PCR plans in the literature, the most notable of which are the results of a symposium published in the Rand Journal in (1989) and Einhorn (1990). Analysis of how various regulatory systems impact firm value can be found in Thompson (1991, Chapter 15) and Lewellen and Mauer (1992). But to date, no analysis of the incentives and their impact on both the stockholder and ratepayer has appeared in the literature.
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Thompson, H.E. (1992). Price-Cap Regulation, Incentives for Cost Reduction, and Stockholder-Ratepayer Conflicts. In: Crew, M.A. (eds) Economic Innovations in Public Utility Regulation. Topics in Regulatory Economics and Policy Series, vol 10. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-3586-7_6
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DOI: https://doi.org/10.1007/978-1-4615-3586-7_6
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