IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v173y2018icp61-64.html
   My bibliography  Save this article

Monopoly regulation in the presence of consumer demand-reduction

Author

Listed:
  • Sato, Susumu

Abstract

I study a monopoly regulation in the setting where consumers can engage in demand-reducing investments. I first show that, when the regulator ignores the consumers’ investments, the excess investment occurs. Next, I analyze the case where the regulator takes consumers’ investments into account and compare the optimal policy under asymmetric information with the first-best policy. Optimal policy results in higher average price, higher level of consumer investment, but lower prices for efficient firms, compared to the first-best.

Suggested Citation

  • Sato, Susumu, 2018. "Monopoly regulation in the presence of consumer demand-reduction," Economics Letters, Elsevier, vol. 173(C), pages 61-64.
    • Handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:61-64
    DOI: 10.1016/j.econlet.2018.09.017
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S016517651830394X
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2018.09.017?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stéphane Auray & Thomas Mariotti & Fabien Moizeau, 2011. "Dynamic regulation of quality," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 246-265, June.
    2. Matsumura, Toshihiro & Yamagishi, Atsushi, 2017. "Long-run welfare effect of energy conservation regulation," Economics Letters, Elsevier, vol. 154(C), pages 64-68.
    3. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cesi Berardino & Iozzi Alberto & Valentini Edilio, 2012. "Regulating Unverifiable Quality by Fixed-Price Contracts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-39, September.
    2. Klein, Michael, 1996. "Competition in network industries," Policy Research Working Paper Series 1591, The World Bank.
    3. MARINI, Marco, 1996. "Property Rights and Market : Employee Privatization as a Cooperative Bargaining Process," LIDAM Discussion Papers CORE 1996023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    4. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    5. David Martimort & Flavio Menezes & Myrna Wooders & ELISABETTA IOSSA & DAVID MARTIMORT, 2015. "The Simple Microeconomics of Public-Private Partnerships," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(1), pages 4-48, February.
    6. Bassanini, Anna & Pouyet, Jerome, 2005. "Strategic choice of financing systems in regulated and interconnected industries," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 233-259, February.
    7. Josse Delfgaauw & Robert Dur, 2008. "Incentives and Workers' Motivation in the Public Sector," Economic Journal, Royal Economic Society, vol. 118(525), pages 171-191, January.
    8. Daron Acemoglu & Amy Finkelstein, 2008. "Input and Technology Choices in Regulated Industries: Evidence from the Health Care Sector," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 837-880, October.
    9. Lehmann, Markus A., 2002. "Error minimization and deterrence in agency control," International Review of Law and Economics, Elsevier, vol. 21(4), pages 373-391, May.
    10. Urrunaga, Roberto & Aparicio, Carlos, 2012. "Infrastructure and economic growth in Peru," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
    11. Ernesto Dal Bo, 2000. "Bribing Voters," Economics Series Working Papers 39, University of Oxford, Department of Economics.
    12. Dawood MAMOON, 2017. "Can micro credit schemes be introduced by formal banking sector?," Journal of Economics Library, KSP Journals, vol. 4(3), pages 359-371, September.
    13. Keppler, Jan Horst & Quemin, Simon & Saguan, Marcelo, 2022. "Why the sustainable provision of low-carbon electricity needs hybrid markets," Energy Policy, Elsevier, vol. 171(C).
    14. Gianpaolo Rossini & Cecilia Vergari, 2014. "The Discrete Charm of Uniform Linear Pricing of an Input Production Joint Venture," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 8(2), pages 68-83, October.
    15. Lise Rochaix, 2004. "Les modes de rémunération des médecins," Revue d'Économie Financière, Programme National Persée, vol. 76(3), pages 223-239.
    16. Philippe Choné & Laurent Flochel & Anne Perrot, 1999. "Allocating and Funding Universal Service Obligations in a Competitive Network Market," Working Papers 99-55, Center for Research in Economics and Statistics.
    17. Anna Matas & Ginés de Rus & Stef Proost & Salvador Bertoméu-Sánchez & Antonio Estache, 2018. "The Financing of Infrastructure / La financiación de las infraestructuras / El finançament de les infraestructures," IEB Reports ieb_report_1_2018, Institut d'Economia de Barcelona (IEB).
    18. Alberto Galasso & Mihkel Tombak, 2014. "Switching to Green: The Timing of Socially Responsible Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(3), pages 669-691, September.
    19. Ding, Mingfa, 2014. "Political Connections and Stock Liquidity: Political Network, Hierarchy and Intervention," Knut Wicksell Working Paper Series 2014/7, Lund University, Knut Wicksell Centre for Financial Studies.
    20. Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.

    More about this item

    Keywords

    Monopoly regulation; Asymmetric information; Demand-reducing investments;
    All these keywords.

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L97 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Utilities: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:173:y:2018:i:c:p:61-64. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.