This paper contributes a theoretical analysis of the effects of regulation on the timing of monopoly investment under certainty in a setting with lumpy investment outlays. We distinguish between price-based regulation and cost-based regulation. To motivate investment, we focus on wear and tear leading to replacement investment and on demand growth resulting in expansion investment. For replacement investment, price-based regulation may work just fine, if properly applied, but it does not work well for expansion investment. Cost-based regulation accelerates investment compared to price-based regulation, but this may not always be efficient.


Gert Brunekreeft

Jacobs University Bremen; Bremen Energie Institut


08.04.2010 | 16:00 - 17:30 Uhr

Event Location

ZEW, L 7,1 D-68161 Mannheim


Heinz König Hall