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Tuesday, May 5, 2020 | History

2 edition of simulation model of rate of return regulation found in the catalog.

simulation model of rate of return regulation

Axel Sell

simulation model of rate of return regulation

by Axel Sell

  • 285 Want to read
  • 18 Currently reading

Published by Institut für Wirtschaftspolitik in Kiel .
Written in English

    Places:
  • Germany (West)
    • Subjects:
    • Price regulation -- Germany (West)

    • Edition Notes

      StatementAxel Sell.
      SeriesDiskussionsbeiträge aus dem Institut für Wirtschaftspolitik der Universität Kiel ;, Nr. 10
      Classifications
      LC ClassificationsHB236.G3 S45 1977
      The Physical Object
      Pagination16 leaves :
      Number of Pages16
      ID Numbers
      Open LibraryOL2617967M
      LC Control Number85183769

      ( views) Modeling Simulation and Optimization: Focus on Applications by Shkelzen Cakaj - InTech, This book provides modeling, simulation and optimization applications in the areas of medical care systems, genetics, business, ethics and linguistics, applying very sophisticated methods. Algorithms, 3-D modeling, virtual reality, and more. The book describes incentive mechanisms and rate designs for promoting optimality, and presents all of the material graphically, with clear explanations of often highly technical topics. Optimal Regulation; Synthesizes and presents the recent theoretical contributions on how to regulate natural monopolies.

      We buid a simple model of commuter railways where congestion exists, show that price-cap (PC) regulation causes congestion compared to rate-of-return (ROR) regulation. We next consider methods to correct it, and show the following results: (i) PC regulation, in which the cap is made contingent on congestion, can correct the congestion without distorting cost-reducing efforts, (ii) PC. Asset Liability Management is the ongoing process of formulating, implementing, monitoring, and revising strategies related to assets and liabilities to achieve financial objectives, for a given set of risk tolerances and constraints Size: 1MB.

      Simulating a Linear Model. Watch a video of this section. Simulating random numbers is useful but sometimes we want to simulate values that come from a specific model. For that we need to specify the model and then simulate from it using the functions described above. Suppose we want to simulate from the following linear model. Modeling and Simulation Books Books published on modeling and simulation are listed in this section in alphabetical order with respect to author names. Advanced Dynamic-System Simulation: Model Replication and Monte Carlo Studies. John Wiley and Sons. Kozachenko, Y. V., Pogorilyak, O. O., Rozora, I. V., and Tegza, A. M. (), Simulation.


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Simulation model of rate of return regulation by Axel Sell Download PDF EPUB FB2

The emphasis on cost recovery in rate of return regulation is the source of the concern that companies may not operate efficiently (2). For exampl e, if the regulator allows a rate of return thatAuthor: Mark A. Jamison. We analyze the rate of return (ROR) regulation that values a firm's assets at their book values, and decompose its effects into three components: the Averch–Johnson (AJ) effect, the capital-gains effect, and the book-valuation effect.

We show that the book-valuation effect can upset the AJ effect to cause an underinvestment in by: 4. Rate-of-return regulation has been criticized for providing inappropriate incentives to regulated firms and for being costly to administer.

An alternative is price-cap regulation, by which ceilings (“caps”), based on indices of price and technological change are imposed, below which the regulated firm has full pricing freedom.

The differences and similarities of the two are reviewed herein Cited by: Rate-of-return regulation is a system for setting the prices charged by government-regulated monopolies. The main premise is that monopolies must charge the same price that would ideally prevail in a perfectly-competitive market, equal to the efficient costs of production, plus.

ALLOWED RATE OF RETURN n Capital Structure n Example: Debt 2, 40% 8% % Equity 3, 60% 12% % TOTAL 5, % Overall rate of return multiplied by rate base as part of revenue requirement computation.

Cost of debt determined by average of the actual interest (coupo n) rate on the debt issuances. Rate Of Return Regulation: A form of price setting regulation where governments determine the fair price which is allowed to be charged by a Author: Will Kenton.

This book is currently in print and may only be viewed by individuals for evaluation purposes. We have scanned all the pages of this book as images and converted the TIF files to PDF and compressed PostScript.

The Averch-Johnson Model of Rate-of-Return Regulation, [, MB] or. The rates of return allowed by public utility commissions varies, but a return on the rate base of 8% to 10% per year is a good representative figure. ‹ Electricity Industry Structure and Regulation up Economic Dispatch and Operations of Electric Utilities ›.

excessively high prices: price cap regulation and rate-of-return regulation. The rate-of-return ap-proach is used in Canada, Japan, and the United States, where regulatory agencies fix the rate of return that a utility can earn on its assets.

They set the price the utility can charge so as to al-low it to earn a specified rate of return—and File Size: KB. This paper is a case study on the role of complex computer simulation models in the regulation of the electricity industry.

The analysis focuses on electricity production cost simulation models as they are used to set prices for certain nonutility generators in by: rate-of-return regulation the stipulation by the government of maximum permitted levels of PROFIT accruing to a MONOPOLY supplier.

Profit regulation is commonly used in the USA and the UK to control the pricing policies of (privately owned) PUBLIC UTILITIES. The model simulation is then repea times to obtain confidence intervals for real GDP growth, the unemployment rate, the core inflation rate, and the federal funds rate over the extended forecast horizon, as well as the probability of certain events.

4 All simulations assumed an inertial version of the Taylor rule constrained by the. Dynamics of Rate-of-Return Regulation Abstract: Under Rate-of-Return regulation, a rm’s product prices are constrained by the requirement that investors do not earn more than an allowable return on the rm’s assets.

This paper examines the dynamic properties of the Rate-of-Return regulation process when. MDIC sees broad value in model-ing and simulation. The consortium created the Computational Modeling & Simulation (CM&S) project to develop the tools and methods needed to extend the use of modeling and simulation throughout the total product lifecycle.

The next big opportunity for computer models is at the regulatory decision phase of the. The reading on Canvas, "Notes on Regulation and Restructuring," contains a detailed discussion of the inherent incentive problems with rate of return regulation.

While rate of return regulation created a highly stable environment for utilities, it also gave them incentives to make some poor decisions, which cost electricity consumers a lot of.

However, rate of return regulation is also generally viewed as having the advantage of restricting opportunities for regulators to arbitrarily lower companies’ prices. 1 Rate base is the gross value of the company’s assets, minus accumulated depreciation.

Kenneth Train and Sibley's method for using self-selecting tariffs to achieve optimality • The Averch-Johnson model of how rate-of-return regulation induces inefficiencies • Analysis of regulation based on the firm's return on Output, The simulation model that is constructed is a significant improvement over older models, and.

Aswath Damodaran 3 The notion of a benchmark Since financial resources are finite, there is a hurdle that projects have to cross before being deemed acceptable.

This hurdle will be higher for riskier projects than for safer projects. A simple representation of the hurdle rate is as follows: Hurdle rate = Riskless Rate + Risk Premium The two basic questions that every risk and return model in File Size: KB.

Review of Rate of Return Methodologies and Practice Cost of Service: The Total Revenue is equal to the cost of providing all Services (some of which may be the forecast of such costs), and with this cost to be calculated on the basis of: (a) a return (Rate of Return) on the.

I also had a sim asking me to do something I do EVERY DAY at work (involving filling out a basic part of a tax return). I had the form and application memorized. I could NOT tie it out. I knew the first number and the last, but even with the info in the question, couldn't balance it.

I spent almost 25 minutes on this sim. We build a simple model with quality, show that price-cap (PC) regulation causes distorsions in quality compared to rate-of-return (ROR) regulation. We next consider methods to correct this distortion, and show the following results: (i) PC regulation, in which the cap is made contingent on quality, can correct the quality distortion without distorting cost-reducing efforts, (ii) PC regulation.Under rate-of-return regulation, a firm's product prices are constrained by the requirement that investors not earn more than an allowable return on the firm's assets.

This paper examines the dynamic properties of the rate-of-return regulation process when the regulated Cited by: Rate of Return should: Promote renewal of assets Stimulate investment in expansion of services Rate of Return needs to be forward looking, Enabling the firm to plan Rate of Return depends on Value of B (regulatory Asset Base) Forecast rate of return (Weighted Average Cost of .