Opting-out in profit-sharing regulation

To avoid the extremely high profit levels found in recent experiences with price cap regulation, some regulators have proposed a profit- sharing mechanism that revises prices to the benefit of consumers. This paper investigates the conditions under which a regulator can implement such a profit-sharing scheme, having the option to revoke the contract if the firm's profits are excessive. When this option is included in the regulator's objective function and the cost of exercising it is not too high, a long-term equilibrium arises with a state-contingent sharing rule that guarantees and appropriate level of profits. The model determines both the level of profits that triggers the profit-sharing mechanism and the consequent price adjustment endogenously. There is an endogenous regulatory lag initially characterized by a price cap regulation, followed by a period of profit-sharing regime where the firm is motivated to cut prices to avoid revocation.public utilities, price cap regulation, profit-sharing, stochastic games

Firm Regulation and Profit-Sharing: A Real Option Approach

To avoid the extremely high profit levels found in recent experience of public utilities’ regulation, some regulators have introduced a profit-sharing (PS) rule that revises prices to the benefit of consumers. However, in order to be successful, a PS rule should satisfy appropriate incentive conditions. In this paper, we study the incentive properties of a second best PS mechanism designed by the regulator to induce a regulated monopolist to divert its "excessive" profits to the customers. In a real option model where a regulated monopolist manages a long-term franchise contract and the regulator has the option to revoke the contract if there is serious welfare loss, we first endogenously derive the welfare maximising PS rule under the verifiability of profits. We then explore the dynamic efficiency of this PS rule under non-verifiability of profits and study the firm’s incentive to comply with it in an infinite-horizon game. Finally, we derive the price adjustment path which follows the adoption of a PS rule in a price cap regulation. We show that the riskiness of the distribution of the firm’s future profits and the regulator’s cost in revoking the franchise contract are key factors in determining the equilibrium properties of a dynamic PS rule.

Opting-out in profit-sharing regulation

To avoid the extremely high profit levels found in recent experiences with price cap regulation, some regulators have proposed a profit-sharing mechanism that revises prices to the benefit of consumers. This paper investigates the conditions under which a regulator can implement such a profit-sharing scheme, having the option to revoke the contract if the firm's profits are excessive. When this option is included in the regulator's objective function and the cost of exercising it is not too high, a long-term equilibrium arises with a state-contingent sharing rule that guarantees and appropriate level of profits. The model determines both the level of profits that triggers the profit- sharing mechanism and the consequent price adjustment endogenously. There is an endogenous regulatory lag initially characterized by a price cap regulation, followed by a period of profit-sharing regime where the firm is motivated to cut prices to avoid revocation.Public utilities, Price cap regulation, profit-sharing, stochastic games

Firm Regulation and Profit-Sharing: A Real Option Approach

To avoid high profit levels often experienced in countries where monopolies in public utility sectors are regulated through price-cap mechanisms, several regulatory agencies have recently introduced profit-sharing (PS) clauses aimed at obtaining price reductions to the benefit of consumers. However, the implementation of these PS clauses has often turned out to be severely con- trained by the incompleteness of the price-cap itself and the non-verifiability of firms’profits. This paper studies the properties of a second-best optimal PS mechanism designed by the regulator to induce the regulated monopolist to divert part of its profits to custormers. In a dynamic model where a reg- ulated monopolist manages a long-term franchise contract and the regulator has the option to revoke the contract if there are serious welfare losses, we first derive the welfare maximising PS mechanism under verifiability of prof- its. Subsequently, we explore the sustainability of the PS mechanism under non-verifiability of profits. In a infinite-horizon game, it is showed that the dynamic sustainability of the PS clause crucially depends upon the magni- tude of the regulator’s revocation cost: the higher this cost, the lower the profit shared and the less frequent the regulator’s PS introduction. Finally, we present the endogenous and dynamic price adjustment which follows the adoption of the investigated PS mechanism in a price-cap regulation setting.Price-cap regulation, Profit-sharing, Real options

Regulating local Public Utilities by Profit-Sharing

This paper concerns "profit-sharing" within an incomplete regulatory contract where a municipality delegates a risk-neutral firm to manage a local utility. Together with a price cap regulation (PCR) mechanism, the contract envisages the possibility of the municipality revoking the contract if the firm's profits are percieved "excessively" high. We show that when this threat is credible and the cost of exercising it is not too high, a long-term efficient equilibrium arises which guarantees the firm with an appropriate level of profits. The consequent regulation timing consists of an endogenous regulatory lag where the regulation has a PCR nature, followed by a period of ROR in which the firm is motivated to adjust its price downward to avoid contract recall. We also show that excessive revocation costs make the firm an unregulated monopolist with an infinite regulatory lag where ROR looks like a pure PCR.

Optimal penalty for investment delay in public procurement contracts

Our aim in this paper is to provide a general framework in which to determine the optimal penalty fee inducing the contractor to respect the contracted delivery date in public procurement contracts (PPCs). We do this by developing a real option model that enables us to investigate the contractor's value of investment timing flexibility which the penalty rule - de facto - introduces. We then apply this setting in order to evaluate the range of penalty fees in the Italian legislation on PPCs: according to our calibration analysis, there is no evidence that the substantial delays recorded in the execution times of Italian investments are to be due to incorrectly set penalty fees. This result opens the way for other explanations of delays in PPCs: we thus extend our model to include the probability that the penalty is ineffectively enforced and study how calibration results are accordingly affected. We finally show how our model can be used to investigate both the case of a penalty/premium rule and the one of an optimal penalty fee in a concession contract.public procurement contracts, penalty fee, investment timing flexibility, investment irreversibility, contract incompleteness, enforceability of rules.

Option to revoke and regulation of local utilities

We study a long-term relationship between a risk-neutral firm that has been delegated to manage a local utility project and a regulator that has always the option-to-revoke the delegation. We show that when the threat of revocation is credible and the cost of exercising it is not too high, the "cooperative" equilibrium is an efficient solution which guarantees the utility with an appropriate level of return. The regulation timing consists of an endogenous regulatory lag where the regulation has a fixed-price nature followed by a period of rate-of-return regulation in which the firm is motivated to adjust its output price downward to avoid revocation. We also show that excessive revocation costs make the firm an unregulated monopolist with an infinite regulatory lag

"It Is Never too late": Optimal Penalty for Investment Delay in Public Procurement Contracts

We provide a general framework in which to determine the optimal penalty fee inducing the contractor to respect the contracted delivery date in public procurement contracts (PPCs). We do this by developing a real option model that enables us to investigate the contractor’s value of investment timing flexibility which the penalty rule - de facto - introduces. We then apply this setting in order to evaluate the range of penalty fees in the Italian legislation on PPCs. According to our calibration analysis, there is no evidence that the substantial delays recorded in the execution times of Italian PPCs are due to incorrectly set penalty fees. This result opens the way for other explanations of delays in Italian PPCs: specifically, we extend our model to investigate the probability of enforcing a penalty which we assume negatively affected by the "quality" of the judicial system and the discretionality of the court in voiding the rule. Our simulations show that the penalty fee is highly sensitive to the "quality" of the judicial system. Specifically referring to the Italian case, we show that the optimal penalty should be higher than those set according to the present Italian law.Public Procurement Contracts, Penalty Fee, Investment Timing Flexibility, Contract Incompleteness, Enforceability of Rules

Instalações para Bezerras em Aleitamento e Boas Práticas de Criação: Extremo oeste e Santa Catarina

TCC(graduação) - Universidade Federal de Santa Catarina. Campus Curitibanos. Medicina Veterinária.O objetivo deste trabalho foi revisar aspectos da criação de bezerras de raças leiteiras no período de aleitamento, elencando os principais manejos a serem realizados desde o nascimento até o desmame. Alguns pontos foram abordados, como os cuidados com a fêmea no anteparto, o parto, as manobras para a sobrevivência no período neonatal e nas primeiras semanas de vida do animal, e como avaliar se a criação está sendo realizada corretamente. Foram ainda discutidos alguns tipos de instalações existentes para essa criação, como as baias individuais cobertas, elevadas com piso ripado ou de concreto com utilização de camas, as quais prevalecem no Extremo Oeste do estado de Santa Catarina. E ainda foram elencados os principais erros de manejo vistos nessa região.The objective of this academic work was to review the breeding of dairy heifers on the suckling period, listing the main necessary handling from birth to weaning. Some points have been discussed, such as antepartum care, parturition, survival maneuvers in the neonatal period and the first few weeks of the animal's life, and how to assess whether the breeding is being performed correctly. Were also discussed some types of existing installations for this breeding, such as individual covered, raised bays with ripped or concrete floors with beds as predominating, and which are the most prevalent in the Extremo Oeste of the Santa Catarina state. And they were also listed the main management errors seen in this region

Comportamento Mecânico do Concreto Compactado com Rolo com Adição de Cinza de Madeira

TCC (graduação) - Universidade Federal de Santa Catarina. Campus Joinville. Engenharia de Infraestrutura.O ramo da construção civil está cada vez mais em busca de alternativas sustentáveis para o desenvolvimento de suas tecnologias, gerando tanto uma redução nos impactos ambientais, como econômicos. O setor industrial é responsável por uma alta geração de resíduos que são nocivos ao meio ambiente. O objetivo deste trabalho é desenvolver análises quanto à viabilidade de empregar tais resíduos, especificamente os resíduos provenientes do processo de combustão da madeira (cinzas), incorporando-os na fabricação do concreto compactado com rolo. O CCR é uma opção que pode ser escolhida quando se procura soluções com resistência maior que o pavimento flexível, possui também uma maior durabilidade e suporta maiores intervalos de tempo entre sua manutenção. Na primeira fase foi realizada a caracterização dos materiais (agregado miúdo, agregado graúdo e cinza de madeira), posteriormente corpos de prova foram moldados com substituição parcial de 5% e 10% do agregado fino por cinza. Foram realizados ensaios de consistência, resistência à compressão axial, porosidade aberta, absorção de água e densidade aparente. Os ensaios indicaram que a substituição do resíduo resultou no aumento da porosidade aberta e consequente aumento da absorção, diminuição da densidade e da resistência à compressão simples do concreto compactado com rolo