The economic theory of regulation versus alternative theories for the electric utilities industry: A simultaneous probit model

This study investigates the effect of regulation on the price of electricity using a simultaneous equation system which is based on the modern theory of regulation. The estimated results show that the probability of the occurrence of regulation of utility prices by the regulatory body is positively related to utility prices. But, regulation remains ineffective in reducing the price of electricity. In all, the evidence presented here adds to, and supports, the body of knowledge regarding the theory of economic regulation.