Incentive Regulation of Prices when Costs are Sunk

Broadband investment and regulation: A literature review

“…Increased information dissemination can foster the firm's investment in quality. Evans and Guthrie (2006) Economies of scale; price-insensitive demand; uncertain capital prices.…”

Modeling welfare loss asymmetries arising from uncertainty in the regulatory cost of finance

“…The initial capital cost term, k Q 0 , is replaced with the cost function C(Q 0 ) = k Q η 0 where η is the cost elasticity (cf. Evans and Guthrie (2006)). The marginal cost after the initial installation is then assumed constant, and determined as the marginal cost of the last unit of initial investment (as kηQ η−1 0 ).…”

Price-Cap Regulation and the Scale and Timing of Investment

“…If the firm instead sells access to other firms, then this will be a derived demand and p will be the access price. 6 Evans and Guthrie (2006) use this cost function to study cost-minimizing investment by a firm that must maintain an exogenous capacity level. Dobbs (2004) analyzes the constant-returns-to-scale limiting case (ε → 1).…”

“…2 For example, Dixit (1991) considers a perfectly competitive industry, Dobbs (2004) a monopolistic one, and Roques and Savva (2009) an oligopoly that includes the models of Dixit and Dobbs as limiting cases. 3 Our starting point is the model in Evans and Guthrie (2006), which features investment scale economies and a firm that minimizes the cost of its investment program, subject to an exogenous capacity constraint. 4 For example, two 200kV transmission lines may be costlier to install than one 400kV line.…”