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Regulating a Monopoly Offering Priority Service

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Author Info
Matsukawa, Isamu

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Abstract

This paper investigates the effects of alternative forms of regulation on the market penetration and capacity, which are determined by a profit-maximizing monopolist providing priority service to consumers. For continuous priority service, a minimum reliability standard, price cap and rate of return regulation lead to larger capacity than in the absence of regulation. A minimum reliability standard reduces the market penetration while price cap and rate of return regulation increase it. The regulatory effects on the market penetration and capacity are also examined for discrete priority service, and policy implications of these effects are discussed for electricity supply industry.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 991.

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Date of creation: 17 Nov 2006
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Handle: RePEc:pra:mprapa:991

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Related research
Keywords: priority service monopoly minimum reliability standard price cap rate of return regulation

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L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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  1. Chao, Hung-po & Wilson, Robert, 1987. "Priority Service: Pricing, Investment, and Market Organization," American Economic Review, American Economic Association, vol. 77(5), pages 899-916, December. [Downloadable!] (restricted)
  2. Spulber, Daniel F, 1993. "Monopoly Pricing of Capacity Usage under Asymmetric Information," Journal of Industrial Economics, Blackwell Publishing, vol. 41(3), pages 241-57, September. [Downloadable!] (restricted)
  3. Joskow, P.L., 2005. "Patterns of Transmission Investment," Cambridge Working Papers in Economics 0527, Faculty of Economics, University of Cambridge. [Downloadable!]
    Other versions:
  4. Viswanathan, Nagarathnam & Tse, Edison T S, 1989. "Monopolistic Provision of Congested Service with Incentive-Based Allocation of Priorities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 153-74, February. [Downloadable!] (restricted)
  5. Spulber, Daniel F, 1992. "Capacity-Contingent Nonlinear Pricing by Regulated Firms," Journal of Regulatory Economics, Springer, vol. 4(4), pages 299-319, December.
  6. Mohan Munasinghe & Mark Gellerson, 1979. "Economic Criteria for Optimizing Power System Reliability Levels," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 353-365, Spring. [Downloadable!] (restricted)
  7. Besanko, David & Donnenfeld, Shabtai & White, Lawrence J, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 743-67, November. [Downloadable!] (restricted)
  8. Woo, Chi-Keung & Horowitz, Ira & Martin, Jennifer, 1998. "Reliability Differentiation of Electricity Transmission," Journal of Regulatory Economics, Springer, vol. 13(3), pages 277-92, May. [Downloadable!] (restricted)
  9. Chao, Hung-Po & Peck, Stephen C, 1998. "Reliability Management in Competitive Electricity Markets," Journal of Regulatory Economics, Springer, vol. 14(2), pages 189-200, September. [Downloadable!] (restricted)
  10. Smith, Stephen A, 1989. "Efficient Menu Structures for Pricing Interruptible Electric Power Service," Journal of Regulatory Economics, Springer, vol. 1(3), pages 203-23, September.
  11. Wilson, Robert B, 1989. "Efficient and Competitive Rationing," Econometrica, Econometric Society, vol. 57(1), pages 1-40, January. [Downloadable!] (restricted)
  12. Besanko, David & Donnenfeld, Shabtai, 1988. "Rate of return regulation and product variety," Journal of Public Economics, Elsevier, vol. 36(3), pages 293-304, August. [Downloadable!] (restricted)
  13. Paul L. Joskow & Jean Tirole, 2004. "Reliability and Competitive Electricity Markets," NBER Working Papers 10472, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-65, June.
  15. Deng, Shi-Jie & Oren, Shmuel S, 2001. "Priority Network Access Pricing for Electric Power," Journal of Regulatory Economics, Springer, vol. 19(3), pages 239-70, July. [Downloadable!] (restricted)
  16. John Tschirhart & Frank Jen, 1979. "Behavior of a Monopoly Offering Interruptible Service," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 244-258, Spring. [Downloadable!] (restricted)
  17. Tan, Chin-Woo & Varaiya, Pravin, 1993. "Interruptible electric power service contracts," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 495-517, May. [Downloadable!] (restricted)
  18. Wilson, Robert, 1989. "Ramsey Pricing of Priority Service," Journal of Regulatory Economics, Springer, vol. 1(3), pages 189-202, September.
  19. Rudnick, Hugh & Raineri, Ricardo, 1997. "Transmission pricing practices in South America," Utilities Policy, Elsevier, vol. 6(3), pages 211-218, September. [Downloadable!] (restricted)
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