 | Regulation is not the ideal way to encourage market competition. It is always preferable to encourage market competition. However, there are "market failures" when the market is not perfectly efficient in allocating resources, leading to suboptimal distribution among the population. Therefore, the aim of any market regulation should be to replicate what happens in a market under conditions of perfect competition. This study sets forth and analyses the methodologies for fixing tariffs used in the modeling of an efficient operator, focusing on the advantages and disadvantages and looking at the results of a number of recent applications in Chile, Venezuela and Colombia. |
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