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Pricing Dynamics of Network Utilities in Developing Countries

Author

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  • Chisari Omar

    (Universidad Argentina de la Empresa and CONICET)

  • Kessides Ioannis N.

    () (The World Bank)

Abstract

This paper examines the pricing of a utility with an underdeveloped network facing a competitive fringe, short-run network adjustment costs, theft of service, and the threat of retaliatory government intervention that is increasing with the price it charges. Under a variety of plausible assumptions (in the context of developing countries) the utility will find its long-run profits enhanced if it exercises pricing restraint in the early stages of network development. These findings provide some useful insights for the design of post-privatization regulatory governance in developing countries where years of price controls have contributed to choking off investment in network expansion.

Suggested Citation

  • Chisari Omar & Kessides Ioannis N., 2009. "Pricing Dynamics of Network Utilities in Developing Countries," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-21, September.
  • Handle: RePEc:bpj:rneart:v:8:y:2009:i:3:n:1
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    Cited by:

    1. Omar Chisari, 2010. "Notes on Optimal Growth, Climate Change Calamities, Adaptation and Mitigation," Research Department Publications 4685, Inter-American Development Bank, Research Department.
    2. Magnus Söderberg, 2010. "Informal Benchmarks as a Source of Regulatory Threat in Unregulated Utility Sectors," CESifo Working Paper Series 2973, CESifo Group Munich.
    3. Magnus Söderberg & Makoto Tanaka, 2012. "Spatial price homogeneity as a mechanism to reduce the threat of regulatory intervention in locally monopolistic sectors," Working Papers hal-00659458, HAL.

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