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Pricing and Price Regulation in a Costumer-Owned Monopoly

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  • Nicola Doni
  • Pier Angelo Mori

Abstract

In the first part of the paper we study the pricing policies of a customer-owned firm in the absence of external regulation. The profit-sharing rule is a key element of the price choice and our analysis focuses on the two most common ones, uniform and proportional. The main result is that the self-discipline effect generally ensures the dominance of customer-ownership over investor-ownership in welfare terms, though under neither rule it is enough to attain the first-best in equilibrium. Then, customer-owned firms, like forprofit ones, need some external price regulation. In the second part we address this topic. We show first that the optimal regulatory policies for investor-owned service providers are not optimal for customerowned ones, and hence price regulation is affected by the ownership mode. Another factor that is shown to condition the effectiveness of regulation is the sharing rule. The paper closes with a few results on the optimal regulatory design for customer-owned firms.

Suggested Citation

  • Nicola Doni & Pier Angelo Mori, 2014. "Pricing and Price Regulation in a Costumer-Owned Monopoly," Euricse Working Papers 1470, Euricse (European Research Institute on Cooperative and Social Enterprises).
    • Handle: RePEc:trn:utwpeu:1470
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    File URL: https://www.euricse.eu/publications/wp-70-14-pricing-and-price-regulation-in-a-customer-owned-monopoly-2/
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    References listed on IDEAS

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    Cited by:

    1. Biggar , Darryl & Söderberg, Magnus, 2024. "Customers’ value-for-money for a regulated service across different owners," Ratio Working Papers 372, The Ratio Institute.

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    More about this item

    Keywords

    Customer ownership; public utilities; price regulation;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • P13 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Cooperative Enterprises

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