How to determine the X in RPI-X regulation: a user's guide

We examine the appropriate choice of an X factor in RPI-X (or price cap) re gulation. After providing a basic guideline, we explain how to modify this guideline to account for: (1) limited spans of regulatory control; (2) anti cipated structural changes in the regulated industry, such as a strengtheni ng of competitive forces; (3) major impacts of the pricing decisions of the regulated firm on the economy-wide rate of price inflation; and (4) imperf ect competition outside of the regulated sector. (C) 2000 Elsevier Science Ltd. All rights reserved.