Moretto, Michele; Panteghini, Paolo M.; Scarpa, Carlo - 2003
In this article we analyse the effects of different regulatory schemes (price cap and profit sharing) on a firm …'s investment of endogenous size. Using a real option approach in continuous time, we show that profit sharing does not affect a … firm's start-up decision relative to a pure price cap scheme. Unless the threshold after which profit sharing intervenes is …