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INCENTIVE REGULATION AND THE ROLE OF CONVEXITY IN BENCHMARKING ELECTRICITY DISTRIBUTION: ECONOMISTS VERSUS ENGINEERS
Author(s) -
GRIFELLTATJÉ Emili,
KERSTENS Kristiaan
Publication year - 2008
Publication title -
annals of public and cooperative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.526
H-Index - 37
eISSN - 1467-8292
pISSN - 1370-4788
DOI - 10.1111/j.1467-8292.2008.00364.x
Subject(s) - benchmarking , electricity , incentive , convexity , distribution (mathematics) , electric power distribution , sample (material) , economics , parametric statistics , microeconomics , industrial organization , econometrics , engineering , mathematics , statistics , management , financial economics , electrical engineering , mathematical analysis , chemistry , chromatography , voltage
** : This note illustrates the potential impact of the specification of a convex production technology on establishing minimal costs compared to the use of a non‐convex technology when benchmarking electricity distributors. This methodological reflection is mainly motivated by recent engineering literature providing evidence for non‐convexities in electricity distribution. An empirical illustration using non‐parametric specifications of technology illustrates this main point using a sample of Spanish electricity distribution firms earlier analysed in Grifell‐Tatjé and Lovell (2003) .