Promoting Capital Improvements by Public Utilities: A Supergame Approach
A public utility undertakes capital improvements only if it expects to earn revenues that cover necessary investments and provide a competitive return. Typically, outlays occur within a short span of time while the returns are spread over a much longer period. This applies to expenditures for cost-reducing investments, capacity expansion, or product enhancements. It is especially true of utilities that adopt new technologies such as the latest advances in telecommunications networks.
KeywordsIncome Expense Lution Librium Stake
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