Regulatory behaviour under threat of court reversal: theory and evidence from the Swedish electricity market

Soderberg, Magnus, Menezes, Flavio M. and Santolino, Miguel (2018) Regulatory behaviour under threat of court reversal: theory and evidence from the Swedish electricity market. Energy Economics, 71 302-310. doi:10.1016/j.eneco.2018.03.006

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Author Soderberg, Magnus
Menezes, Flavio M.
Santolino, Miguel
Title Regulatory behaviour under threat of court reversal: theory and evidence from the Swedish electricity market
Journal name Energy Economics   Check publisher's open access policy
ISSN 0140-9883
1873-6181
Publication date 2018-03-06
Sub-type Article (original research)
DOI 10.1016/j.eneco.2018.03.006
Open Access Status Not yet assessed
Volume 71
Start page 302
End page 310
Total pages 9
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Language eng
Subject 2002 Economics and Econometrics
2100 Energy
Abstract This paper investigates how regulators influence outcomes in regulated markets when their decisions are subject to the threat of court review. We develop a theoretical model that provides a number of behavioural implications when (i) all regulators' dislike having their decisions overturned by courts, (ii) inexperienced regulators care more about not having their decisions overturned than experienced regulators, and (iii) experienced regulators also care about consumer surplus. The theoretical implications are tested using a database of Swedish regulatory decisions from the electricity distribution sector. We provide empirical evidence that inexperienced regulators are more likely to set higher regulated prices than experienced regulators, and as the complexity of the case increases, there are on average more overturned decisions and higher prices for inexperienced regulators. The links between experience, complexity and regulatory outcomes are both statistically and economically significant. Simulations show that if those decisions that were not appealed had been appealed, then the court would have lowered the prices by 10% on average.
Keyword Regulation
Effort
Complexity
Experience
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
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Created: Mon, 12 Mar 2018, 09:32:13 EST by Alys Hohnen on behalf of School of Economics