Pricing Dynamics of Network Utilities in Developing Countries
AbstractThis paper examines the pricing of a utility with an underdeveloped network facing a competitive fringe, short-run network adjustment costs, theft of service, and the threat of retaliatory government intervention that is increasing with the price it charges. Under a variety of plausible assumptions (in the context of developing countries) the utility will find its long-run profits enhanced if it exercises pricing restraint in the early stages of network development. These findings provide some useful insights for the design of post-privatization regulatory governance in developing countries where years of price controls have contributed to choking off investment in network expansion.
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Bibliographic InfoArticle provided by De Gruyter in its journal Review of Network Economics.
Volume (Year): 8 (2009)
Issue (Month): 3 (September)
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Web page: http://www.degruyter.com
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- Magnus Söderberg, 2010. "Informal Benchmarks as a Source of Regulatory Threat in Unregulated Utility Sectors," CESifo Working Paper Series 2973, CESifo Group Munich.
- Magnus Söderberg & Makoto Tanaka, 2012. "Spatial price homogeneity as a mechanism to reduce the threat of regulatory intervention in locally monopolistic sectors," Working Papers hal-00659458, HAL.
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