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Regulation, Competition, and the Structure of Prices

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  • Vickers, John

Abstract

Many competition policy issues in regulated industries concern the structure of prices charged by multiproduct firms--for example price discrimination, non-linear pricing, cross-subsidies, and network access pricing. This article first sets out the (Ramsey) principles of optimal pricing to recover fixed costs. The sometimes conflicting aims of promoting competition and pursuing social objectives are brought into the analysis. Questions of whether to allow pricing structure discretion to the firm, and how much, are considered next. With asymmetric information, some discretion is often desirable, but its optimal form is hard to characterize. The article then turns to the controversial network access pricing problem--on what terms should an integrated dominant firm be required to supply inputs required by its rivals? Finally, there is discussion of pricing structure regulation in the transition from more to less regulation, which, it is to be hoped, is in prospect in parts of the regulated industries as effective competition develops. Copyright 1997 by Oxford University Press.

Suggested Citation

  • Vickers, John, 1997. "Regulation, Competition, and the Structure of Prices," Oxford Review of Economic Policy, Oxford University Press, vol. 13(1), pages 15-26, Spring.
  • Handle: RePEc:oup:oxford:v:13:y:1997:i:1:p:15-26
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    Cited by:

    1. B. Willems & E. Ehlers, 2008. "Cross-Subsidies in the Electricity Sector," Competition and Regulation in Network Industries, Intersentia, vol. 9(3), pages 201-228, September.
    2. Armstrong, Mark, 2001. "The theory of access pricing and interconnection," MPRA Paper 15608, University Library of Munich, Germany.
    3. Estache, Antonio & Gomez-Lobo, Andres & Leipziger, Danny, 2000. "Utility privatization and the needs of the poor in Latin America - Have we learned enough to get it right?," Policy Research Working Paper Series 2407, The World Bank.
    4. Raineri, Ricardo & Giaconi, Pablo, 2005. "Price and access charge discrimination in electricity distribution: An application to the Chilean case," Energy Economics, Elsevier, vol. 27(5), pages 771-790, September.
    5. Fredrik Sjöholm & Nannan Lundin, 2013. "Foreign Firms and Indigenous Technology Development in the People's Republic of China," Asian Development Review, MIT Press, vol. 30(2), pages 49-75, September.
    6. Mario Pagliero, 2000. "Competition in the UK gas industry," ICER Working Papers 12-2000, ICER - International Centre for Economic Research.
    7. Patrick Massey, 2004. "Is Irish Utility Regulation Failing Consumers?," Economics, Finance and Accounting Department Working Paper Series n1451104, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    8. Waddams Price, Catherine & Bennett, Matthew, 1999. "New gas in old pipes: opening the UK residential gas market to competition," Utilities Policy, Elsevier, vol. 8(1), pages 1-15, March.
    9. Eduardo Saavedra & Xavier Mancero, "undated". "Entry, Cream Skimming, and Competition: Theory and Simulation for Chile's Local Telephony Market," ILADES-Georgetown University Working Papers inv132, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
    10. Gianni De Fraja & Alberto Iozzi, "undated". "Short Term and Long Term Effects of Price Cap Regulation," Discussion Papers 00/61, Department of Economics, University of York.
    11. Kotakorpi, Kaisa, 2002. "Access Pricing and Competition in Telecommunications," Discussion Papers 283, VATT Institute for Economic Research.
    12. Antonio Estache & L. Wren-Lewis, 2008. "Towards a Theory of Regulation for Developing Countries: Following Laffont's Lead," Working Papers ECARES 2008_018, ULB -- Universite Libre de Bruxelles.

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