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A Test for Natural Monopoly in Iranian Electricity Distribution Industry: A Panel Random Coefficients Model Analysis

Author

Listed:
  • Mirhashemi Dehnavi, Sayed Mohamad

    () (Ph.D. Candidate in Economics, Shiraz University)

  • Sadraei Javaheri , Ahmad

    () (Associate Professor of Economics, Shiraz University)

  • Marzban, Hossein

    () (Associate Professor of Economics, Shiraz University)

  • Mirdehghan, Sayed Morteza

    () (Associate Professor of Mathematics, Shiraz University)

Abstract

In economics, natural monopoly is described as a situation in which, for structural reasons, only one firm finds it profitable to produce in the market. This Concept is more important and more practical in Industries that faced price and non-price regulation such as water, gas and electricity distribution and telecommunication. In this study natural monopoly structure in Iranian electricity distribution was investigated. To this, a Translog cost function was employed. Relative capital price, relative other input price and customer electricity sales were assumed as input price vector and output, respectively. In order to estimate the second order approximation of Translog cost function, the random coefficient model in panel data and the data of 2004 till 2014 were used. The results showed the existence of natural monopoly in some companies in contrast to other.

Suggested Citation

  • Mirhashemi Dehnavi, Sayed Mohamad & Sadraei Javaheri , Ahmad & Marzban, Hossein & Mirdehghan, Sayed Morteza, 2017. "A Test for Natural Monopoly in Iranian Electricity Distribution Industry: A Panel Random Coefficients Model Analysis," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 4(1), pages 119-148, May.
  • Handle: RePEc:ris:qjatoe:0068
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    More about this item

    Keywords

    Natural monopoly; Economies of scale. Iranian electricity distribution companies; Translog cost function; Random coefficient model in panel data;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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