Short Term and Long Term Effects of Price Cap Regulation
AbstractThis paper uses a very simple example (two goods, linear symmetric demand and cost) to study the effects of the price cap regulatory mechanism. We show that if a given price vector is preferred (using current welfare as the criterion) to another, then it is not necessarily the case that it is also preferred in the long run (using the presented discounted value of welfare as the criterion). The relationship between current welfare and profit and therefore the firm's incentive to bargain for a given price vector depend on the specific details of the mechanism considered.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 00/61.
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Ramsey prices; Price cap regulation.;
Find related papers by JEL classification:
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
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