This Note compares the effects of price cap and rate-of-return regulation on the risk borne by regulated utilities. It present evidence that price cap regulation subjects firms to greater risks and therefore raises their cost of capital. This result has one clear implication: firms regulated by...

The authors propose a number of privatization rules to ensure that management will improve after privatization. Governments should ensure that the privatized sector has several firms operating in industries that are local natural monopolies, so that if one operator goes bankrupt, another can...