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Welfare Implications of Fully Distributed Cost Pricing Applied to Partially Regulated Firms

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  • George Sweeney

Abstract

The profit-maximizing price structure of a multiproduct firm subject to fully distributed cost rules is considered. It is shown that a firm that sells in both regulated and unregulated markets would choose a dominated price vector. Similar incentives for inefficient pricing are provided to a firm that sells in markets subject to different regulatory authorities.

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  • George Sweeney, 1982. "Welfare Implications of Fully Distributed Cost Pricing Applied to Partially Regulated Firms," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 525-533, Autumn.
    • Handle: RePEc:rje:bellje:v:13:y:1982:i:autumn:p:525-533
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    Cited by:

    1. Riechmann, Christoph, 2000. "Strategic pricing of grid access under partial price-caps -- electricity distribution in England and Wales," Energy Economics, Elsevier, vol. 22(2), pages 187-207, April.
    2. William P. Rogerson, 1993. "Inter-temporal Cost Allocation and Managerial Investment Incentives," Discussion Papers 1060, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. John W. Mayo & David E. M. Sappington, 2016. "Regulation in a ‘Deregulated’ Industry: Railroads in the Post-Staggers Era," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(2), pages 203-227, September.
    4. Chang, Yang-Ming & Warren, John T., 1997. "Allocative efficiency and diversification under price-cap regulation," Information Economics and Policy, Elsevier, vol. 9(1), pages 3-17, March.

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