Monopolreglering med nänyttomodellens princip - modellkalibrering och incitament

Report, 2004

Revenue capping is a common way to regulate monopolistic utilities. A common suggestion when the revenue cap is cost based is that the regulator needs to determine the revenue cap so that both fixed and variable cost components as closely as possible match the true cost of the monopoly. In this report, however, it is shown that the variable cost component in the model needs to exceed the true variable cost in order to give incentives to efficiency improvement compared to the case of no regulation. It is also shown that the size of the fixed cost component only affects the amount of market power that the monopoly can excercise.