This article focuses on the use of incentive regulation in the telephone industry in the United States. We first characterize some of the difficulties that have led regulators to move away from traditional rate-ofreturn (cost-based) regulation and toward systems of regulation that provide incentives for increasingly efficient production, allowing firms to share in the social gains from efficiency with increased profits. We then discuss the basic structure of incentive regulation as it has most commonly been adopted in the telephone industry in the United States. The first is price-cap (PC) regulation, which typically allows the firm to

This paper tests the hypothesis that differential regulations reduced the rate of capital turnover in the electric utility industry, resulting in increased emissions of sulfur dioxide. Based on a sample of forty-four privately owned electric utilities operating over the period 1969-83, the authors' results indicate that (1) regulation increased the age of capital by an average of 3.29 years (24.6 percent); (2) increases in the age of capital have no statistically significant impact on emissions; and (3) in the absence of regulation, emissions would have increased by 3.79 tons per million kWhs (34.6 percent

Reviews the book "Financial Reporting in Japan: Regulation, Practice and Environment," by T.E. Cooke and M. Kikuya

We examine the optimal design of a risk‐adjusted deposit insurance scheme when the regulator has less information than the bank about the inherent risk of the bank's assets (adverse selection), and when the regulator is unable to monitor the extent to which bank resources are being directed away from normal operations toward activities that lower asset quality (moral hazard). Under a socially optimal insurance scheme: (1) asset quality is below the first‐best level, (2) higher‐quality banks have larger asset bases and face lower capital adequacy requirements than lower‐quality banks, and (3) the probability of failure is equated across banks

Paul H. Malatesta, Rex Thompson, Government Regulation and Structural Change in the Corporate Acquisitions Market: The Impact of the Williams Act, The Journal of Financial and Quantitative Analysis, Vol. 28, No. 3 (Sep., 1993), pp. 363-379

We review the contemporary theory of financial intermediation. The focus is on contributions in the past 15 years or so that have advanced our understanding of why financial intermediaries exist, the credit allocation and other services they provide in spot and forward credit markets, the contractual nature and allocational consequences of the claims they issue, and the optimal design of bank regulation. Journal of Economic Literature Classification Numbers: 310, 312, and 314

ECONOMIC DEREGULATION of American industry is one of the most important experiments in economic policy of our time.1 In 1977, 17 percent of U.S. GNP was produced by fully regulated industries.2 By 1988, following ten years of partial and complete economic deregulation of large parts of the transportation, communications, energy, and financial industries that total had been cut significantly-to 6.6 percent of GNP.3 The political forces behind the decision to change the market conditions under which roughly $600 billion of U. S. output is produced were strong and varied, but according to political scientists Martha Derthick and Paul Quirk (1985, p. 36), deregulation would never have occurred if economists-especially microeconomists-had not generally supported it through their research.4 In retrospect, it is fair to ask: were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation's effects? Were they able to predict the actual effects of deregulation? This paper surveys the evidence to address these questions and of