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Ramsey Pricing and Competition: The Consequences of Myopic Regulation

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  • Prieger, James E

Abstract

This paper addresses the welfare consequences of applying the Ramsey rule when the regulated firm is not a monopolist in all of its markets. The partially regulated optimum and the outcome of myopic regulation, the "Short-Sighted Ramsey Equilibrium" (SSRE), are examined in a differentiated duopoly model. In the optimum, the markup of competitive substitute goods is relatively high. In the SSRE, the regulator is likely to set the price of competitive substitute goods lower than optimal, and complementary goods higher than optimal. Strategic reactions by a competitor may reverse the result. Copyright 1996 by Kluwer Academic Publishers

Suggested Citation

  • Prieger, James E, 1996. "Ramsey Pricing and Competition: The Consequences of Myopic Regulation," Journal of Regulatory Economics, Springer, vol. 10(3), pages 307-321, November.
    • Handle: RePEc:kap:regeco:v:10:y:1996:i:3:p:307-21
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    Cited by:

    1. Diakité, Daouda & Semenov, Aggey & Thomas, Alban, 2009. "A proposal for social pricing of water supply in Côte d'Ivoire," Journal of Development Economics, Elsevier, vol. 88(2), pages 258-268, March.
    2. William C. Miller, 2007. "Ramsey pricing with long run competition," Economics Bulletin, AccessEcon, vol. 12(34), pages 1-5.
    3. repec:ebl:ecbull:v:12:y:2007:i:34:p:1-5 is not listed on IDEAS
    4. Zhisong Chen & Keith C.K. Cheung & Manyi Tan, 2019. "Inter-Basin Water Transfer Supply Chain Coordination with Ramsey Pricing," IJERPH, MDPI, vol. 16(19), pages 1-22, September.
    5. Patricia M. Danzon & Eric L. Keuffel, 2014. "Regulation of the Pharmaceutical-Biotechnology Industry," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 407-484, National Bureau of Economic Research, Inc.
    6. Felix Höffler, 2006. "Monopoly Prices versus Ramsey-Boiteux Prices: Are they “Similar”, and: Does it Matter?," Journal of Industry, Competition and Trade, Springer, vol. 6(1), pages 27-43, March.

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