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Testing the regulatory threat hypothesis: Evidence from Sweden

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  • Bonev, Petyo
  • Glachant, Matthieu
  • Söderberg, Magnus

Abstract

This study examines whether threat of stricter regulation influences the pricing behavior of firms. Using data on unregulated Swedish local district heating monopolists, we measure the threat level by the number of customer complaints about prices received by a national board. Exploiting a natural experiment, we find that firms reduce prices when customer complaints increase.

Suggested Citation

  • Bonev, Petyo & Glachant, Matthieu & Söderberg, Magnus, 2020. "Testing the regulatory threat hypothesis: Evidence from Sweden," Resource and Energy Economics, Elsevier, vol. 62(C).
    • Handle: RePEc:eee:resene:v:62:y:2020:i:c:s0928765520300889
    DOI: 10.1016/j.reseneeco.2020.101182
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    Cited by:

    1. Ismail Saglam, 2023. "Incentives of a monopolist for innovation under regulatory threat," Economics of Governance, Springer, vol. 24(1), pages 41-66, March.
    2. Fernqvist, Niklas & Broberg, Sarah & Torén, Johan & Svensson, Inger-Lise, 2023. "District heating as a flexibility service: Challenges in sector coupling for increased solar and wind power production in Sweden," Energy Policy, Elsevier, vol. 172(C).
    3. Bonev, Petyo & Glachant, Matthieu & Söderberg, Magnus, 2022. "Implicit yardstick competition between heating monopolies in urban areas: Theory and evidence from Sweden," Energy Economics, Elsevier, vol. 109(C).
    4. Egüez, Alejandro, 2021. "District heating network ownership and prices: The case of an unregulated natural monopoly," Utilities Policy, Elsevier, vol. 72(C).
    5. Boscan, Luis & Söderberg, Magnus, 2021. "A theoretical and empirical analysis of district heating cost in Denmark," Energy Economics, Elsevier, vol. 99(C).

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    More about this item

    Keywords

    Regulatory threat; Monopoly; price setting; spatial interaction; natural experiment;
    All these keywords.

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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