Abstract
Price adjustment mechanisms are employed in the electric utility industry to pass changes in fuel costs on to consumers without formal rate review by a regulatory commission. The predictability of this pass-through and the regulator's limited ability to observe the actions of a firm can create potential incentive problems associated with the choices of technology and fuel supply. This paper is concerned with the regulatory design of pass-through formulas when a factor price is uncertain. The optimal design involves deviating from the full-information optimal price formulas in order to mitigate the incentive problems. © 1981.
Keywords
EconomicsComputer science
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Publication Info
- Year
- 1978
- Type
- preprint
- Citations
- 5
- Access
- Closed
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Cite This
DP Baron,
Raymond De Bondt
(1978).
The design of automatic price adjustment mechanisms.
Lirias (KU Leuven)
.
https://doi.org/10.1016/0022-0531(81)90065-x
Identifiers
- DOI
- 10.1016/0022-0531(81)90065-x