Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/22815 
Authors: 
Year of Publication: 
2007
Series/Report no.: 
Volkswirtschaftliche Diskussionsreihe No. 292
Publisher: 
Universität Augsburg, Institut für Volkswirtschaftslehre, Augsburg
Abstract: 
In order to increase efficiency in the provision of power distribution networks, the German regulator Bundesnetzagentur plans to implement revenue cap regulation together with yardstick competition. Revenue cap regulation could bear the ratchet effect: cost minimization need not to be optimal for the operator who anticipates that his revenue cap will become adjusted according to his cost performance. The regulator could extract all the rent by lowering an operator?s revenue cap to the level of costs he revealed to be possible for him to reach. The ratchet effect could be mitigated by yardstick competition at which the level of revenues that is allowed to one operator is tied to the performance of others that are comparable to him. One will only be allowed to accumulate revenues that recover the least cost level that has been adopted within the group of comparable decision makers. In a setting of two sequential regulatory lags, this paper examines the occurence of the ratchet effect and the mitigating influence that yardstick competition has on it.
Subjects: 
ratchet effect
yardstick competition
regulation
JEL: 
L51
Document Type: 
Working Paper

Files in This Item:
File
Size
229.92 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.