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Efficient versus "Popular" Tariffs for Regulated Monopolies

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  • Beard, T Randolph
  • Thompson, Henry

Abstract

This article analyzes the effects of the popular election of a monopoly regulator on the structure of the resulting price system. Consumers are differentiated by income and vote on a regulator who implements a two-part tariff for all consumers. The structure of the winning tariff depends on the curvature properties of consumer Engel curves. When Engel curves are concave in wealth or income, the most popular tariff involves an excessive fixed charge and pricing below marginal cost. This result contributes to understanding observed anomalies in public utility pricing. Generalizations and extensions of the analysis are discussed. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Beard, T Randolph & Thompson, Henry, 1996. "Efficient versus "Popular" Tariffs for Regulated Monopolies," The Journal of Business, University of Chicago Press, vol. 69(1), pages 75-87, January.
    • Handle: RePEc:ucp:jnlbus:v:69:y:1996:i:1:p:75-87
    DOI: 10.1086/209680
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    Cited by:

    1. Klein, Christopher C. & H. Sweeney, George, 1999. "Regulator preferences and utility prices: evidence from natural gas distribution utilities," Energy Economics, Elsevier, vol. 21(1), pages 1-15, February.
    2. Kaserman, David L. & Mayo, John W., 1999. "Regulatory policies toward local exchange companies under emerging competition: guardrails or speed bumps on the information highway?," Information Economics and Policy, Elsevier, vol. 11(4), pages 367-388, December.

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