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Congestion pricing of inputs in vertically related markets

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  • isamu matsukawa

    (musashi university)

Abstract

This paper conducts a welfare analysis of a two-part tariff that is applied to the congestion pricing of inputs supplied by a natural monopolist with increasing returns to scale to competitive firms that require an input in a fixed proportion to output. Congestion pricing of inputs is optimal for both the welfare-maximizing regulator and the profit-maximizing monopolist if it is applied in the form of a uniform price for the input. However, a two-part tariff for the congestion pricing of inputs is optimal if competition in the downstream market is imperfect or if there is demand uncertainty in the market.

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File URL: http://128.118.178.162/eps/io/papers/0506/0506012.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0506012.

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Length: 35 pages
Date of creation: 28 Jun 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0506012

Note: Type of Document - pdf; pages: 35
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Web page: http://128.118.178.162

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Keywords: two-part tariff;

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  1. Einhorn, Michael A, 1990. "Electricity Wheeling and Incentive Regulation," Journal of Regulatory Economics, Springer, vol. 2(2), pages 173-89, June.
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  8. Vickers, John, 1995. "Competition and Regulation in Vertically Related Markets," Review of Economic Studies, Wiley Blackwell, vol. 62(1), pages 1-17, January.
  9. Thomas-Olivier Leautier, 2000. "Regulation of an Electric Power Transmission Company," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 61-92.
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Citations

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Cited by:
  1. Matsukawa, Isamu, 2008. "The effects of average revenue regulation on electricity transmission investment and pricing," Energy Economics, Elsevier, vol. 30(3), pages 696-714, May.
  2. Stähler, Frank & Traub, Stefan, 2009. "Privatization and liberalization in vertically linked markets," TranState Working Papers 95, University of Bremen, Collaborative Research Center 597: Transformations of the State.

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