Skip Navigation



Oxford Economic Papers Advance Access published online on February 28, 2005
Oxford Economic Papers, doi:10.1093/oep/gpi021
This Article
Right arrow Full Text (PDF)
Right arrow All Versions of this Article:
57/3/447    most recent
gpi021v1
Right arrow Alert me when this article is cited
Right arrow Alert me if a correction is posted
Services
Right arrow Email this article to a friend
Right arrow Similar articles in this journal
Right arrow Alert me to new issues of the journal
Right arrow Add to My Personal Archive
Right arrow Download to citation manager
Right arrowRequest Permissions
Google Scholar
Right arrow Articles by Levine, P.
Right arrow Articles by Trillas, F.
Right arrow Search for Related Content
Social Bookmarking
Add to CiteULike   Add to Connotea   Add to Del.icio.us  
What's this?

© Oxford University Press 2005; All rights reserved

Original Papers

Utility price regulation and time inconsistency: comparisons with monetary policy

Paul Levine 1*, Jon Stern 2, and Francesc Trillas 3

1 Department of Economics, University of Surrey, Guildford, Surrey GU2 5XH
2 London Business School
3 Universitat Autonòma de Barcelona

* To whom correspondence should be addressed.
Paul Levine, E-mail: p.levine{at}surrey.ac.uk


  Abstract

We examine the hold-up problem of price regulation and compare it with the monetary policy credibility problem. For both, reputational solutions are possible provided that the policymaker is sufficiently far-sighted, but the hold-up problem in regulation turns out to be more serious than the inflation bias problem in monetary policy. Even with far-sighted regulators, a reputational equilibrium with optimal investment is undermined if capital depreciates slowly and consumer demand increases slowly. These results make the Rogoff-delegation solution to the regulatory commitment problem especially attractive. The paper concludes with a short discussion linking these results to the empirical literature on utility regulatory regimes.

Keywords: JEL classification: C72; E61; L51.
Add to CiteULike CiteULike   Add to Connotea Connotea   Add to Del.icio.us Del.icio.us    What's this?




Disclaimer: Please note that abstracts for content published before 1996 were created through digital scanning and may therefore not exactly replicate the text of the original print issues. All efforts have been made to ensure accuracy, but the Publisher will not be held responsible for any remaining inaccuracies. If you require any further clarification, please contact our Customer Services Department.