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SOCIAL CONTRACTS AND PIPE DREAMS
Author(s) -
ELLIG JEROME,
HIGH JACK
Publication year - 1992
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1111/j.1465-7287.1992.tb00210.x
Subject(s) - natural monopoly , government (linguistics) , sunk costs , monopoly , economics , business , commission , control (management) , finance , pipeline transport , public economics , industrial organization , market economy , microeconomics , engineering , management , linguistics , philosophy , environmental engineering
Economists' debate over the public utility “regulatory contract” has increasingly focused on three issues created by sunk costs: (i) Protection of sunk capital, (ii) Division of “windfalls” in a world of uncertainty, and (Hi) Mechanisms to control the regulator who administers long‐term agreements. This article uses these three criteria to evaluate regulatory alternatives in the natural gas industry. Facing similar problems under criteria 1 and 2 are: government regulation of pipelines as integrated gas merchants, government regulation of pipelines as gas transporters, and private regulation through competitive contracting. Private contracting, however, offers superior control over the contract administrator, because it removes the Federal Energy Regulatory Commission's monopoly on contract administration.