Handle with care. A primer on incentive regulation

  • Pfeifenberger J
  • Tye W
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Regulators increasingly rely upon incentive regulation as a substitute or refinement of traditional cost of service regulation. Focusing on incentive regulation in the US utility industry, this article first identifies four desirable attributes for incentive mechanisms. It develops a taxonomy of the types of mechanisms that are available, identifies the issues that arise in the design and evaluation of these mechanisms, and then closes with a discussion of the risks associated with various mechanisms. © 1995.

Author-supplied keywords

  • Incentive regulation
  • Price cap mechanism
  • Public utility economics

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  • Johannes P. Pfeifenberger

  • William B. Tye

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