(solution) Deregulation prompted by technological change may result in the regulated incumbent’s

(solution) Deregulation prompted by technological change may result in the regulated incumbent’s

Deregulation prompted by technological change may result in the regulated incumbent’s inability to recover its capital investment. For instance, in the generation of electricity in the United States, estimates of such stranded costs (sometimes called stranded assets) range from $34 to $210 billion . 20 How is permitting entry in such circumstances similar to the holdup problem? What are the implications for the politics and possibilities of deregulation? Can you explain why incumbents should or should not be allowed to recover their stranded assets? What mechanisms would you suggest for recovery? Why?