Abstract
A public utility undertakes capital improvements only if it expects to earn revenues that cover necessary investments and provide a competitive return. Typically, outlays occur within a short span of time while the returns are spread over a much longer period. This applies to expenditures for cost-reducing investments, capacity expansion, or product enhancements. It is especially true of utilities that adopt new technologies such as the latest advances in telecommunications networks.
This paper has benefitted from suggestions made by Bob Rosenthal, Ingo Vogelsang, and Tom Lyon, and comments received in seminars delivered at The Telecommunications Policy Research Conference, The Midwest Mathematical Economics Conference and Virginia Polytechnic Institute. The views expressed in this paper should not be attributed to GTE nor any of its subsidiaries. Remaining errors are, of course, the responsibility of the authors.
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© 1992 Springer-Verlag Berlin · Heidelberg
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Salant, D., Woroch, G. (1992). Promoting Capital Improvements by Public Utilities: A Supergame Approach. In: Neuefeind, W., Riezman, R.G. (eds) Economic Theory and International Trade. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-77671-7_14
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DOI: https://doi.org/10.1007/978-3-642-77671-7_14
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