In infrastructure industries the permitted revenue of a regulated firm depends crucially on the choice of rate base and the allowed rate of return. In this paper we examine the impact of these two variables on the timing of the regulated firm's investment. Since the firm bears all the cost of...

We show that regulators' price-setting, rate base, and allowed rate of return decisions are inextricably linked. Once regulators switch from traditional rate of return regulation, the irreversibility of much infrastructure investment significantly alters the results of the usual approach to...

Incentive regulation allows decentralised decision-making under regulatory parameters set on the basis of industry characteristics. When there is uncertainty, sunk costs, and flexibility in the timing of investment a monopoly will invest later than is socially desirable because it garners only a...

In this paper, we introduce an electricity market model and use it to explore the effect of climate change on electricity output and prices. It is calibrated to the New Zealand Electricity Market, and includes multiple generation fuels, uncertain fuel availability, and storage options. The model...

This paper analyzes the behavior of a firm that chooses both the scale and timing of its investment. Sensitivity analysis shows that greater demand volatility is associated with the firm investing in larger increments, less frequently. This is in contrast to the conventional wisdom, which is...

The existing real options literature explains the value premium as a consequence of either operating leverage raising risk in low-demand states or industry-wide investment lowering risk in high-demand states. This paper presents a simple model in which a value premium arises solely from capacity...

The new public management of the 1980s was based in part on a range of important new insights about the role of transaction and agency costs arising from contractual incompleteness in defining the boundaries of the firm and the governance relationships within it. In this paper, we consider the...

The new public management of the 1980s was based in part on a range of important new insights about the role of transaction and agency costs arising from contractual incompleteness in defining the boundaries of the firm and the governance relationships within it. In this paper, we consider the...

This paper discusses banks' potential to increase their shareholders' welfare by attaching more importance to the environmental performance of farm borrowers. Sustainable farm lending can give banks' shareholders direct ESG (environmental, social and governance) benefits that offset any...

Real options analysis typically assumes that projects are continuously evaluated and launched at precisely the time determined to be optimal. However, real world projects cannot be managed in this way because of the costs of formally evaluating an investment opportunity. This paper analyzes how...