Pricing Discretion and Price Regulation in Competitive Industries
Price capped firms enjoy a large degree of pricing discretion, which may harm customers and competition. We study two alternative regulatory regimes to limit it: the first regime (Absolute) places a fixed upper limit to the prices charged in captive markets, while the other regime (Relative) constrains the captive prices relatively to the competitive ones. Under the Relative regime, captive prices are only weakly lower and competitive prices are always higher than under the Absolute regime. However, the number of competitors and/or their output may be higher under the Relative regime. While the effects on aggregate welfare are ambiguous, there is some evidence that the Relative regime is more likely to increase consumers’ surplus and social welfare the more efficient are the competitors. Copyright Springer Science+Business Media, Inc. 2006
Volume (Year): 29 (2006)
Issue (Month): 2 (03)
|Contact details of provider:|| Web page: http://www.springer.com|
|Order Information:||Web: http://www.springer.com/economics/industrial+organization/journal/11149/PS2|
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.:
- Armstrong, Mark & Vickers, John, 1993.
"Price Discrimination, Competition and Regulation,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 41(4), pages 335-359, December.
- Armstrong, M. & Vickers, J., 1992. "Price Discrimination, Competition and Regulation," Economics Series Working Papers 99140, University of Oxford, Department of Economics.
- repec:ccp:journl:v:53:y:2000:i:3:p:161-175 is not listed on IDEAS
- Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, Elsevier.
- Armstrong, Mark & Doyle, Chris & Vickers, John, 1996. "The Access Pricing Problem: A Synthesis," Journal of Industrial Economics, Wiley Blackwell, vol. 44(2), pages 131-150, June.
- Armstrong, M. & Doyle, C. & Vickers, J., 1995. "The access pricing problem: a synthesis," Discussion Paper Series In Economics And Econometrics 9532, Economics Division, School of Social Sciences, University of Southampton.
- Dieter Bös & Lorenz Nett, 1990. "Privatization, price regulation, and market entry an asymmetric multistage Duopoly model," Journal of Economics, Springer, vol. 51(3), pages 221-257, October.
- Alberto Iozzi & Marco Fioramanti, 2004. "Strategic Choice of the Price Structure and Entry Deterrence Under Price Cap Regulation," Bulletin of Economic Research, Wiley Blackwell, vol. 56(4), pages 333-352, October.
- Armstrong, Mark & Vickers, John, 2000. "Multiproduct Price Regulation under Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 48(2), pages 137-160, June.
- Alberto Iozzi, 2001. "Strategic pricing and entry deterrence under price-cap regulation," Journal of Economics, Springer, vol. 74(3), pages 283-300, October.
- Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
- John Vickers, 2005. "Abuse of Market Power," Economic Journal, Royal Economic Society, vol. 115(504), pages 244-261, 06.
- Otero, Jesus & Waddams Price, Catherine, 2001. "Price Discrimination, Regulation and Entry in the UK Residential Electricity Market," Bulletin of Economic Research, Wiley Blackwell, vol. 53(3), pages 161-175, July.
- Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
- Anton, James J. & Vander Weide, James H. & Vettas, Nikolaos, 2002. "Entry auctions and strategic behavior under cross-market price constraints," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 611-629, May.
- Ireland, Norman J, 1992. "On the Welfare Effects of Regulating Price Discrimination," Journal of Industrial Economics, Wiley Blackwell, vol. 40(3), pages 237-248, September.
- Mark Armstrong & John Vickers, 1991. "Welfare Effects of Price Discrimination by a Regulated Monopolist," RAND Journal of Economics, The RAND Corporation, vol. 22(4), pages 571-581, Winter. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:kap:regeco:v:29:y:2006:i:2:p:151-165. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.