Dynamics of Rate-of-Return Regulation
研究了受回报率监管的企业在周期性投资时，价格如何收敛到稳定值，并发现折旧规则决定了稳定价格与长期边际成本的关系，监管效率取决于折旧与资产生产率模式的匹配程度。
Under rate-of-return regulation, a firm's product prices are constrained by the requirement that investors not earn more than an allowable return on the firm's assets. This paper examines the dynamic properties of the rate-of-return regulation process when the regulated firm periodically undertakes new capacity investments. Our analysis identifies prices that correspond to stationary values of the regulation process. It is shown that the underlying depreciation rules for property, plant, and equipment determine whether these stationary prices will be above, equal to, or below the long-run marginal cost of providing the regulated service. We provide conditions under which the rate-of-return regulation process is dynamically stable so that prices indeed converge to their stationary values. The overall efficiency of this regulation method is shown to depend on how well the applicable depreciation schedule matches the productivity pattern of the assets in use. This paper was accepted by Gérard P. Cachon, accounting.