Yardstick Competition and Reliability of Supply in Public Utilities

CRI Technical Paper No. 15

37 Pages Posted: 23 Apr 2011

See all articles by Misja C. Mikkers

Misja C. Mikkers

Dutch Healthcare Authority; Tilburg Law and Economics Center (TILEC)

Victoria Shestalova

Netherlands Bureau for Economic Policy Analysis

Date Written: July 1, 2003

Abstract

In regulation of network services such as the distribution of electricity, gas and water prices have traditionally been based on own costs of companies. Recently a few regulatory bodies in Europe started to use yardstick competition, a scheme that links prices to the performance of other companies. This has a beneficial impact on costs over the short run, but might have an adverse effect on the reliability of services in the long run. To curb these undesirable effects yardstick competition should be enhanced with some mechanism regulating quality. We show how forms of yardstick competition can be extended to incorporate the aspect of reliability.

Keywords: regulation, yardstick competition, reliability of supply

JEL Classification: D24, L51, L94

Suggested Citation

Mikkers, Misja C. and Shestalova, Victoria, Yardstick Competition and Reliability of Supply in Public Utilities (July 1, 2003). CRI Technical Paper No. 15, Available at SSRN: https://ssrn.com/abstract=1816285 or http://dx.doi.org/10.2139/ssrn.1816285

Misja C. Mikkers (Contact Author)

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Victoria Shestalova

Netherlands Bureau for Economic Policy Analysis ( email )

2508 GM The Hague
Netherlands

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