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Can Competition Replace Regulation for Small Utility Customers?

Author

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  • Green, Richard

Abstract

Many utility markets are now being opened to competition, and some regulators have expressed the hope that this will make the regulation of consumer prices unnecessary. In this paper, entrants offer (differentiated) 'added value', but consumers incur a switching cost if they buy from one of them. The incumbent's profit-maximising price may be well above the level of its costs. This is likely to be the case in the UK's energy industries, but competition may be able to replace regulation in telecommunications, where marginal costs are lower, demand elasticity higher, and entrants can give more 'added value'.

Suggested Citation

  • Green, Richard, 2000. "Can Competition Replace Regulation for Small Utility Customers?," CEPR Discussion Papers 2406, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2406
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    Citations

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    Cited by:

    1. Jackie Krafft & Evens Salies, 2008. "Why and how should innovative industries with high consumer switching costs be re-regulated?," Documents de Travail de l'OFCE 2008-04, Observatoire Francais des Conjonctures Economiques (OFCE).
    2. repec:kap:empiri:v:44:y:2017:i:2:d:10.1007_s10663-016-9318-6 is not listed on IDEAS
    3. Evens Salies, 2010. "Penalizing Consumers for Saving Electricity," Economics Bulletin, AccessEcon, vol. 30(2), pages 1144-1153.
    4. Paul L. Joskow, 2003. "The Difficult Transition to Competitive Electricity Markets in the U.S," Working Papers 0308, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
    5. Alderighi, Marco, 2007. "The role of buying consortia among SMEs in the electricity market in Italy," Energy Policy, Elsevier, vol. 35(6), pages 3463-3472, June.
    6. Paul Joskow, 2003. "Electricity Sector Restructuring and Competition: Lessons Learned," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 548-558.
    7. Mark Lijesen, 2002. "End user prices in liberalised energy markets," CPB Discussion Paper 16, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Lehto, Eero, 2011. "Electricity prices in the Finnish retail market," Energy Policy, Elsevier, vol. 39(4), pages 2179-2192, April.
    9. Jackie Krafft & Evens Salies, 2008. "The cost of switching Internet providers in the broadband industry, or why ADSL has diffused faster than other innovative technologies: Evidence from the French case," Post-Print hal-00203512, HAL.

    More about this item

    Keywords

    Competition; Regulation; Switching Costs; Utilities;

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General

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