Interest rate risk and utility risk premia during 1982-93

Article Abstract:

Risk premia was inversely related to interest rates and interest rate risk in public utilities between 1982 and 1993. Risk premia increased as interest rates decreased. Between 1982 and 1993, risk premia showed a downward time trend. These findings may be useful for policy makers in that regulators should take into consideration the degree of recent interest rate variability and consequent interest rate risk when comparing utility common stocks and utility bonds.

Interest Rates, Analysis, Finance, United States economic conditions, Public utilities, Regression analysis

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Ramsey pricing in the presence of risk

Article Abstract:

The Ramsey pricing structure presents the second-best Pareto-optimal situation given a regulated monopoly of various products. The structure is analyzed against a market where marginal costs fluctuate with a known probability function. Different results are obtained when all cost risk is absorbed either by consumers or by investors. However, when risk is optimally shared by consumers and investors, the prices predicted by the Ramsey model are obtained.

Risk (Economics)

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The dynamics of cost-plus pricing

Article Abstract:

Cost-plus pricing is being used by a good number of firms. Fear of negative outcomes from competition, regulation, absence of demand and cost data and a sense of adequate pricing security are some reasons why companies prefer it. Cost-plus pricing can be seen as a dynamic process. As a dynamic policy, it has the potential for rapid adjustment to fixed quality points and defines limits to the updating of initial prices.

Prices

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