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Pricing Dynamics of Network Utilities in Developing Countries

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Author Info

  • Chisari Omar

    (Universidad Argentina de la Empresa and CONICET)

  • Kessides Ioannis N.

    ()
    (The World Bank)

Abstract

This 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 Info

Article provided by De Gruyter in its journal Review of Network Economics.

Volume (Year): 8 (2009)
Issue (Month): 3 (September)
Pages: 1-21

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Handle: RePEc:bpj:rneart:v:8:y:2009:i:3:n:1

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Cited by:
  1. 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.
  2. Magnus Söderberg, 2010. "Informal Benchmarks as a Source of Regulatory Threat in Unregulated Utility Sectors," CESifo Working Paper Series 2973, CESifo Group Munich.

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