Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/93929
Authors: 
Höffler, Felix
Kranz, Sebastian
Year of Publication: 
2010
Series/Report no.: 
SFB/TR 15 Discussion Paper 320
Abstract: 
A fully unbundled, regulated network firm of unknown efficiency level can untertake unobservable effort to increase the likelihood of low downstream prices, e.g. by facilitating downstream competition. To incentivize such effort, the regulator can use an incentive scheme paying transfers to the firm contingent on realized downstream prices. Alternatively, the regulator can force the firm to sell the following forward contracts: the firm pays the downstream price to the owners of a contract, but recieves the expected value of the contracts when selling them to a competivitve financial market. We compare the two regulatory tools with respect to regulatory capture: if the regulator can be bribed to suppress information on the underlying state of the world (the basic propability of high downstream prices, or the type of the firm), optimal regulation uses forward contracts only.
Subjects: 
incentive regulation
regulatory capture
virtual power plants
JEL: 
L42
L51
K23
L94
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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