Empirical Studies of Utility Regulation

Abstract

During the past fifteen years, numerous studies have been published that purport to demonstrate quantitatively the effects of price and profit regulation on regulated monopolies. The purpose of this paper is to provide a brief, minimally technical summary and evaluation of these studies. For the most part, the fine theoretical and econometric details are ignored in favor of an exposition of the general approach that researchers have taken to the problem of estimating regulatory effects. While the primary focus is on studies of so-called "natural monopolies," references are also made for purposes of comparison to studies examining the effect of regulation on competitive markets. The Bibliography contains the standard references on the empirical effects of price regulation in all the basic infrastructural industries—energy, telecommunications and transportation—whether competitive or monopolistic.