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Optimal Risk Allocation for Regulated Monopolies and Consumers.

Abstract:

The model shows how a regulated monopolist's price should change as random cost and demand parameters are revealed. The regulator has a Ramsey-type problem. With a linear tariff a trade-off between allocative efficiency and risk sharing typically exists. The attitudes of the consumer and the firm to both income and price risk determine how the price should move. Sufficient conditions are found for price adjustment schemes used in practice to be optimal. These schemes include full, partial and...

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Authors


Simon Cowan More by this author
Journal:
Journal of Public Economics
Volume:
88
Publication date:
2004
URN:
uuid:87104fa8-87b6-48de-9192-f979ccdb7f8e
Local pid:
oai:economics.ouls.ox.ac.uk:11050
Language:
English

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