BROWSE

Rate Of Return Regulation

Definition

Rate-of-return regulation is a system for setting the prices charged by government-regulated monopolies. The main premise is that monopolies will be compelled to charge the same price that would ideally prevail in a perfectly competitive market, which is equal to the efficient costs of production plus a market-determined rate of return on capital.

What is 'Rate Of Return Regulation'

A form of price setting regulation where governments determine the fair price which is allowed to be charged by a monopoly. Rate of return regulation is meant to protect customers from being charged higher prices due to the monopoly's power, while still allowing the monopoly to cover its costs and earn a fair return for its owners

Explaining 'Rate Of Return Regulation'

Customers benefit from prices that are reasonable, given the monopolists operating costs. Rate of return regulation is often criticized because it provides little incentive to reduce costs and increase efficiency. A monopolist who is regulated in this manner does not earn more if costs are reduced. Thus, customers may still be charged higher prices than they would be under free competition.


Further Reading


Rate-of-return regulation and utility capital structure decision
www.jstor.org [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …

Price-cap versus rate-of-return regulationPrice-cap versus rate-of-return regulation
link.springer.com [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …

An expository note on depreciation and profitability under rate-of-return regulationAn expository note on depreciation and profitability under rate-of-return regulation
link.springer.com [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …

Financial aspects of rate-of-return regulationFinancial aspects of rate-of-return regulation
www.jstor.org [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …

Property rights versus public spirit: Ownership and efficiency of US electric utilities prior to rate-of-return regulationProperty rights versus public spirit: Ownership and efficiency of US electric utilities prior to rate-of-return regulation
www.jstor.org [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …

Flotation Cost Allowance in Rate of Return Regulation: A NoteFlotation Cost Allowance in Rate of Return Regulation: A Note
www.jstor.org [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …

Rate-of-return regulation and two-part tariffsRate-of-return regulation and two-part tariffs
academic.oup.com [PDF]
… In the case at hand, the discrepancy might arise because the regulator determines allowed returns to equity and debt separately and fails to account for their interaction … 3. W. Baumol and AK Klevorick, "Input Choices and Rate-of-Return Regulation: An Overview of the …


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