---
_id: '5218'
abstract:
- lang: eng
  text: 'In order to avoid over-regulation, some countries have experimented with
    what might be called threat-based regulation. The idea is - similarly to the contestable
    market model - that actual regulation may not be necessary as long as the threat
    of regulation is credible. In that case, so the idea, even monopolies will abstain
    from setting monopolistic prices in order to avoid being regulated. As experience
    from Germany and New Zealand has demonstrated, there are quite a number of problems
    associated with threat-based regulatory systems. The most significant problem
    has turned out to be the likely under-regulation and according welfare losses
    from market power, and in this context, a critical issue that has been identified
    is the credibility of the regulatory threat. If the threat of regulation is not
    credible, a light-handed regulatory regime (LHRR) amounts to leaving monopolistic
    firms unregulated, clearly an undesirable situation from a welfare point of view.
    This failure of threat-based regulatory systems results from potential free-rider
    problems associated with good corporate behaviour (as in the case of Germany''s
    electricity market) as well as the lack of credibility of the threat either because
    of the weakness of the enforcement authorities or due to political constraints.
    Furthermore, a problem emerges if exercising the threat of regulation implies
    an abandonment of the LHRR and a corresponding substitution with heavy-handed
    ex ante regulation. An innovative way out of this dilemma has been the quasi-automatic
    threshold system originally designed for New Zealand''s electricity distribution
    networks, which aims at simulating the pressures that companies would face in
    competitive markets. '
author:
- first_name: Justus
  full_name: Haucap, Justus
  last_name: Haucap
- first_name: Ulrich
  full_name: Heimeshoff, Ulrich
  last_name: Heimeshoff
- first_name: André
  full_name: Uhde, André
  id: '36049'
  last_name: Uhde
  orcid: https://orcid.org/0000-0002-8058-8857
citation:
  ama: 'Haucap J, Heimeshoff U, Uhde A. Credible Threats as an Instrument of Regulation
    for Network Industries. In: Welfens P, ed. <i>REGULATORY CHANGES, INNOVATIONS
    AND INVESTMENT DYNAMICS IN THE DIGITAL WORLD ECONOMY</i>. Berlin; 2006:171-202.'
  apa: Haucap, J., Heimeshoff, U., &#38; Uhde, A. (2006). Credible Threats as an Instrument
    of Regulation for Network Industries. In P. Welfens (Ed.), <i>REGULATORY CHANGES,
    INNOVATIONS AND INVESTMENT DYNAMICS IN THE DIGITAL WORLD ECONOMY</i> (pp. 171–202).
    Berlin.
  bibtex: '@inbook{Haucap_Heimeshoff_Uhde_2006, place={Berlin}, title={Credible Threats
    as an Instrument of Regulation for Network Industries}, booktitle={REGULATORY
    CHANGES, INNOVATIONS AND INVESTMENT DYNAMICS IN THE DIGITAL WORLD ECONOMY}, author={Haucap,
    Justus and Heimeshoff, Ulrich and Uhde, André}, editor={Welfens, P.Editor}, year={2006},
    pages={171–202} }'
  chicago: Haucap, Justus, Ulrich Heimeshoff, and André Uhde. “Credible Threats as
    an Instrument of Regulation for Network Industries.” In <i>REGULATORY CHANGES,
    INNOVATIONS AND INVESTMENT DYNAMICS IN THE DIGITAL WORLD ECONOMY</i>, edited by
    P. Welfens, 171–202. Berlin, 2006.
  ieee: J. Haucap, U. Heimeshoff, and A. Uhde, “Credible Threats as an Instrument
    of Regulation for Network Industries,” in <i>REGULATORY CHANGES, INNOVATIONS AND
    INVESTMENT DYNAMICS IN THE DIGITAL WORLD ECONOMY</i>, P. Welfens, Ed. Berlin,
    2006, pp. 171–202.
  mla: Haucap, Justus, et al. “Credible Threats as an Instrument of Regulation for
    Network Industries.” <i>REGULATORY CHANGES, INNOVATIONS AND INVESTMENT DYNAMICS
    IN THE DIGITAL WORLD ECONOMY</i>, edited by P. Welfens, 2006, pp. 171–202.
  short: 'J. Haucap, U. Heimeshoff, A. Uhde, in: P. Welfens (Ed.), REGULATORY CHANGES,
    INNOVATIONS AND INVESTMENT DYNAMICS IN THE DIGITAL WORLD ECONOMY, Berlin, 2006,
    pp. 171–202.'
date_created: 2018-10-31T14:18:42Z
date_updated: 2022-01-06T07:01:47Z
department:
- _id: '186'
- _id: '188'
editor:
- first_name: P.
  full_name: Welfens, P.
  last_name: Welfens
extern: '1'
jel:
- L96
- L94
- L50
- K23
keyword:
- light-handed regulation
- network industries
- electricity
- telecommunications
language:
- iso: eng
page: 171-202
place: Berlin
publication: REGULATORY CHANGES, INNOVATIONS AND INVESTMENT DYNAMICS IN THE DIGITAL
  WORLD ECONOMY
publication_status: published
status: public
title: Credible Threats as an Instrument of Regulation for Network Industries
type: book_chapter
user_id: '21810'
year: '2006'
...