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Dynamics of rate-of-return regulation / Alexander Nezlobin in Management science, Vol. 58 N° 5 (Mai 2012) 

Public ISBD [article]  in Management science > Vol. 58 N° 5 (Mai 2012) . - pp. 980-995 Titre : Dynamics of rate-of-return regulation Type de document : texte imprimé Auteurs : Alexander Nezlobin, Auteur ; Madhav V. Rajan, Auteur ; Stefan Reichelstein, Auteur Année de publication : 2012 Article en page(s) : pp. 980-995 Note générale : Management Langues : Anglais (eng) Mots-clés : Accounting  Marginal  cost  Rate-of-return  regulation  Depreciation Résumé : Under rate-of-return regulation, a firm's product prices are constrained by the requirement that investors not earn more than an allowable return on the firm's assets. This paper examines the dynamic properties of the rate-of-return regulation process when the regulated firm periodically undertakes new capacity investments. Our analysis identifies prices that correspond to stationary values of the regulation process. It is shown that the underlying depreciation rules for property, plant, and equipment determine whether these stationary prices will be above, equal to, or below the long-run marginal cost of providing the regulated service. We provide conditions under which the rate-of-return regulation process is dynamically stable so that prices indeed converge to their stationary values. The overall efficiency of this regulation method is shown to depend on how well the applicable depreciation schedule matches the productivity pattern of the assets in use. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/5/980.abstract [article] Dynamics of rate-of-return regulation [texte imprimé] / Alexander Nezlobin, Auteur ; Madhav V. Rajan, Auteur ; Stefan Reichelstein, Auteur . - 2012 . - pp. 980-995. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 5 (Mai 2012) . - pp. 980-995 Mots-clés : Accounting  Marginal  cost  Rate-of-return  regulation  Depreciation Résumé : Under rate-of-return regulation, a firm's product prices are constrained by the requirement that investors not earn more than an allowable return on the firm's assets. This paper examines the dynamic properties of the rate-of-return regulation process when the regulated firm periodically undertakes new capacity investments. Our analysis identifies prices that correspond to stationary values of the regulation process. It is shown that the underlying depreciation rules for property, plant, and equipment determine whether these stationary prices will be above, equal to, or below the long-run marginal cost of providing the regulated service. We provide conditions under which the rate-of-return regulation process is dynamically stable so that prices indeed converge to their stationary values. The overall efficiency of this regulation method is shown to depend on how well the applicable depreciation schedule matches the productivity pattern of the assets in use. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/5/980.abstract