Congestion pricing of inputs in vertically related markets

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Congestion pricing of inputs in vertically related markets

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isamu matsukawa (musashi university)

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Isamu Matsukawa

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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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
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Handle: RePEc:wpa:wuwpio:0506012

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L - Industrial Organization

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-07-03 (All new papers)
NEP-COM-2005-07-03 (Industrial Competition)
NEP-IND-2005-07-03 (Industrial Organization)
NEP-MIC-2005-07-03 (Microeconomics)

References listed on IDEAS
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Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Isamu Matsukawa, 2005. "The Effects of Average Revenue Regulation on Electricity Transmission Investment and Pricing," Industrial Organization 0512009, EconWPA. [Downloadable!]
Other versions:
- 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. [Downloadable!] (restricted)

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