Journal of Regulatory Economics; 9:5-39 (1996) 9 Kluwer Academic Publishers Regulation and Administered Contracts Revisited: Lessons from Transaction-Cost Economics for Public Utility Regulation 1

This article reexamines the administered contracts approach to regulation in light of recent empirical research that establishes the importance of transaction-costs in the organizational choice and design decisions. After reviewing the fundamentals of transaction cost reasoning and the franchise bidding-ver-sus-regulation debate, the study surveys the empirical literature on franchise bidding, contracting, and vertical integration. The implications of transaction-cost heories for current policies toward pubic utility regulation and deregulation are also addressed. 1