that the eight-year catch-up period allowed in this regulation gives strong incentives to reduce costs since the firms can …Data Envelopment Analysis (DEA) based cost norms have attractive properties in the regulation of natural monopolies … to suboptimal incentives. When a regulated firm compares the marginal change in its cost norm with its marginal cost of …

stringency. When the size distribution of firms is heavily skewed, regulation size thresholds can reduce transaction costs for … regulatory agencies while bringing most production within a regulatory framework. However, size-based regulation may have … unintended consequences if operations downsize, slow their growth, or enter at a smaller size in order to avoid regulation. These …