文章基本信息

标题：Investment Incentives under Price-Cap Regulation
本地全文：下载
作者：David Bartolini
期刊名称：Theoretical Economics Letters
印刷版ISSN：2162-2078
电子版ISSN：2162-2086
出版年度：2012
卷号：2
期号：5
页码：570-575
DOI：10.4236/tel.2012.25105
出版社：Scientific Research Publishing
摘要：In the literature on price regulation, the price-cap mechanism is seen as a very powerful incentive mechanism towards efficiency improvements. What about quality investments? The empirical literature is not univocal: Some studies suggest a deterioration of quality, while others do not find any statistically significant impact. We analyze the incentive provided by price-cap regulation in a setting in which the investment decisions of the regulated firm suffer from hold-up, and contacts are incomplete. We show that the incentives to invest in cost-saving innovations can be fostered by a price-cap contract with a “sufficient” regulatory lag, while for other types of investments, such as quality enhancement, the same contract does not help. Furthermore, we show that if the firm faces a binding resource constraint the price-cap contract generates a crowding-out effect between the two types of investment. This might explain the non univocal empirical evidence.
关键词：Price Regulation; Investments; Incomplete Contracts