Price-Capping regulation as a protectionist strategy in developing countries
AbstractIn developing countries undergoing liberalising reforms, there are typically local incumbents facing the loss of protection. Strategic lobbying by such firms for a price-capping regulatory regime can deter entry. We show that a regulatory price can be set such that the net profit of the entrant is lower than the entry cost thus deterring entry and that it is possible for the profit of the incumbent to be greater under regulation than under unregulated duopoly. We consider the case of multiple incumbents threatened by entry and also extend our analysis to incorporate lobbying by the entrant.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 132.
Date of creation: 04 Jun 2003
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entrant; incumbent; lobbying; price-capping regulation;
Other versions of this item:
- Peter Lawrence & Arijit Mukherjee, 2002. "Price-Capping Regulation as a Protectionist Strategy in Developing Countries," Keele Economics Research Papers KERP 2002/18, Centre for Economic Research, Keele University.
- Peter Lawrence & Arijit Mukherjee, 2002. "Price-Capping Regulation as a Protectionist Strategy in Developing Countries," Industrial Organization 0211009, EconWPA.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
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