COMMON COSTS AND CROSS-SUBSIDIES: MISESTIMATION VERSUS MISALLOCATION
"Existing models of cross-subsidization have focused on either ex ante distortions to investments or misallocations of common costs as the principal sources of cross-subsidies in regulated firms. In this paper, we identify a third vehicle for such cross-subsidization that, given regulators' preferences, is not only likely but likely to be prominent; namely, the misestimation of the magnitude of common costs. Because our results incorporate regulators' preferences, they may provide the necessary building block for a positive theory of the magnitude of observed common costs that has, heretofore, been absent in the literature. "("JEL L51, L97") Copyright (c) 2008 Western Economic Association International.
Year of publication: |
2009
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Authors: | BURTON, MARK L. ; KASERMAN, DAVID L. ; MAYO, JOHN W. |
Published in: |
Contemporary Economic Policy. - Western Economic Association International - WEAI, ISSN 1074-3529. - Vol. 27.2009, 2, p. 193-199
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Publisher: |
Western Economic Association International - WEAI |
Saved in:
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