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Can Competition Replace Regulation for Small Utility Customers?

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  • Green, Richard

Abstract

Many utility markets are now being opened to competition, and some regulators have expressed the hope that this will make the regulation of consumer prices unnecessary. In this paper, entrants offer (differentiated) 'added value', but consumers incur a switching cost if they buy from one of them. The incumbent's profit-maximising price may be well above the level of its costs. This is likely to be the case in the UK's energy industries, but competition may be able to replace regulation in telecommunications, where marginal costs are lower, demand elasticity higher, and entrants can give more 'added value'.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2406.

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Date of creation: Mar 2000
Date of revision:
Handle: RePEc:cpr:ceprdp:2406

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Related research

Keywords: Competition; Regulation; Switching Costs; Utilities;

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Cited by:
  1. Joskow, P.L., 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Cambridge Working Papers in Economics 0328, Faculty of Economics, University of Cambridge.
  2. Mark Lijesen, 2002. "End user prices in liberalised energy markets," CPB Discussion Paper 16, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Evens Salies, 2010. "Penalizing Consumers for Saving Electricity," Economics Bulletin, AccessEcon, vol. 30(2), pages 1144-1153.
  4. Alderighi, Marco, 2007. "The role of buying consortia among SMEs in the electricity market in Italy," Energy Policy, Elsevier, vol. 35(6), pages 3463-3472, June.
  5. Paul L. Joskow, 2003. "Electricity Sector Restructuring And Competition - Lessons Learned," Working Papers 0314, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  6. Jackie Krafft & Evens Salies, 2008. "The cost of switching Internet providers in the broadband industry, or why ADSL has diffused faster than other innovative technologies: Evidence from the French case," Post-Print hal-00203512, HAL.
  7. Jackie Krafft & Evens Salies, 2008. "Why and how should innovative industries with high consumer switching costs be re-regulated?," Documents de Travail de l'OFCE 2008-13, Observatoire Francais des Conjonctures Economiques (OFCE).
  8. Lehto, Eero, 2011. "Electricity prices in the Finnish retail market," Energy Policy, Elsevier, vol. 39(4), pages 2179-2192, April.

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