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- Politecnico di Milano
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- Energy Engineering
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- Energy Economics
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- Notes · By topic
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Regulation Part 2
Study material for Energy Economics, shared by the Studwiz community and reviewed by moderators.
Energy EconomicsBy topic
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1 ENERGY ECONOMICS 15 - 19 April 2016 REGULATION – part 2 2 Summary REGULATION UNDER ASYMMETRIC INFORMATION ................................................................................. 3 THEORETICAL DESCRIPTION ..................................................................................................................5 FIXED PRICE REGULATORY CONTRACT or PRICE CAP REGULATORY MECHANISM (ex-ante) ..........5 COST OF SERVICE CONTRACT ........................................................................................................... 6 TRADE-OFF: MENU OF CONTRACTS (Laffont and Tirole, 1993). ........................................................ 6 FIRST EXAMPLE OF THE REGULATION INCENTIVE MECHANISM ......................................................... 8 COST OF SERVICE CONTRACT or (RATE OF RETURN REGULATION) ................................................... 9 IMPLEMENTATION OF THE BARGAIN VIA THE RATE CASE .............................................................. 9 CONSIDERATIONS............................................................................................................................. 11 THE AVERCH-JOHNSON MODEL (critic to cost of service regulation) ............................................... 12 PRICE-CAP ............................................................................................................................................. 14 RATCHET EFFECT .............................................................................................................................. 15 IN PRACTICE .......................................................................................................................................... 16 Example 1: NATURAL GAS transportation in Italy…
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