IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Pricing Decisions of Regulated Firms: A Behavioral Approach

  • Paul L. Joskow

Once the prices for utility service are set by state regulatory authorities, they remain at fixed levels until they are officially increased or decreased by the regulatory agency. A utility company is not free to vary the prices of its service independently. This paper presents the results of an attempt to specify and estimate a behavioral model of the pricing decisions of regulated firms. The "threshold" behavior of regulated firms with regard to their decisions to seek general price increases from state regulatory authorities and their decisions to file "voluntary" price decreases is discussed, and two decision equations are specified and then estimated for regulated electric utilities in New York State. The decision to file for a price increase is shown to depend on the growth rate of earnings per share achieved by the firm in the current and previous year, on the level of interest coverage realized in the current year, and on a variable which measures prior expectations of success in the hearing room. The decision to file a voluntary price decrease is shown to depend on the growth rate in earnings per share and a variable which measures the expectations of "forced" regulation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://links.jstor.org/sici?sici=0005-8556%28197321%294%3A1%3C118%3APDORFA%3E2.0.CO%3B2-2&origin=repec
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 4 (1973)
Issue (Month): 1 (Spring)
Pages: 118-140

as
in new window

Handle: RePEc:rje:bellje:v:4:y:1973:i:spring:p:118-140
Contact details of provider: Web page: http://www.rje.org

Order Information: Web: https://editorialexpress.com/cgi-bin/rje_online.cgi

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rje:bellje:v:4:y:1973:i:spring:p:118-140. 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: ()

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.