Brunekreeft, Gert; Rammerstorfer, Margarethe - 2020
This paper shows with a formal model that under monopoly regulation, OPEX-risk can be a source for a CAPEX-bias. If … OPEX and CAPEX are substitutes, the regulated firm can reduce the risk of the firm and thereby reduce the true cost of … capital by rebalancing OPEX and CAPEX. If the allowed rate-of-return on capital is not influenced by the firm's actions, this …