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A Theoretical Application of Moral Risk in the Brazilian Energy Market

DOI: 10.4236/oalib.1103401, PP. 1-12

Subject Areas: Political Economy, Public Economics

Keywords: Asymmetric Information, Moral Hazard, Electricity Regulation

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Abstract

This paper aims to infer about the possible consequences of the existence of moral hazard in the Brazilian’s electric sector for the final consumer. In 2013, the new regulatory framework in the Brazilian’s electric sector was settled, which aims to encourage investment in quality and continuity of this services. Thus, the fees started to incorporate the costs related to the investments needed to maintain the quality and continuity of the service, which opens the door to the emergence of moral hazard. Moral risk has its origin in asymmetric infor-mation, which is a market failure that justifies the existence of economics regu-lations. In this sense, it is necessary to verify if the new regulatory framework, in fact, can encourage behavior that, per theory, should mitigate and its effects on the population. We found indices that the actual system adopted may drive the firms to explore a new regulatory system, harming the consumers at this process.

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Couto, S. V. V. and Silva, E. M. (2017). A Theoretical Application of Moral Risk in the Brazilian Energy Market. Open Access Library Journal, 4, e3401. doi: http://dx.doi.org/10.4236/oalib.1103401.

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