Spatial price homogeneity as a mechanism to reduce the threat of regulatory intervention in locally monopolistic sectors
We claim that a reason for why unregulated investor-owned local monopolies do not always charge the monopoly price is that they are threatened by customer complaints that may lead to retaliations from local elected officials. When investor-owned monopolies are exposed to this threat they will mimic the price(s) of their neighbour(s); the stronger the threat, the higher the spatial price correlation. The threat increases when elected officials have pro-consumer preferences and neighbours are geographically close. The empirical analysis, based on a complete cross-sectional data set from the Swedish district heating sector in 2007, confirms the theoretical predictions.
|Date of creation:||2012|
|Note:||View the original document on HAL open archive server: https://hal-mines-paristech.archives-ouvertes.fr/hal-00659458|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kelejian, Harry H & Prucha, Ingmar R, 1998.
"A Generalized Spatial Two-Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 17(1), pages 99-121, July.
- Harry H. Kelejian & Ingmar R. Prucha, 1997. "A Generalized Spatial Two Stage Least Squares Procedure for Estimating a Spatial Autoregressive Model with Autoregressive Disturbances," Electronic Working Papers 97-002, University of Maryland, Department of Economics, revised Aug 1997.
- Leidy, Michael P, 1994. "Rent Dissipation through Self-Regulation: The Social Cost of Monopoly under Threat of Reform," Public Choice, Springer, vol. 80(1-2), pages 105-28, July.
- Cropper, Maureen L & Deck, Leland B & McConnell, Kenneth E, 1988. "On the Choice of Functional Form for Hedonic Price Functions," The Review of Economics and Statistics, MIT Press, vol. 70(4), pages 668-75, November.
- Makoto Tanaka, 2011. "The Effects of Uncertain Divestiture as Regulatory Threat," Journal of Industry, Competition and Trade, Springer, vol. 11(4), pages 385-397, December.
- Athanassopoulos, Antreas D., 2000. "Customer Satisfaction Cues To Support Market Segmentation and Explain Switching Behavior," Journal of Business Research, Elsevier, vol. 47(3), pages 191-207, March.
- Buettner, Thiess, 2001.
"Local business taxation and competition for capital: the choice of the tax rate,"
Regional Science and Urban Economics,
Elsevier, vol. 31(2-3), pages 215-245, April.
- Büttner, Thiess, 1998. "Local Business Taxation and Competition for Capital: The Choice of the Tax Rate," ZEW Discussion Papers 98-43, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Thiess Buettner, 2001. "Local Business Taxation and Competition for Capital: The Choice of the Tax Rate," CESifo Working Paper Series 440, CESifo Group Munich.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, March.
- Carlo Cambini & Laura Rondi, 2010. "Regulatory Independence and Political Interference: Evidence from EU Mixed-Ownership Utilities’ Investment and Debt," Working Papers 2010.69, Fondazione Eni Enrico Mattei.
- Revelli, Federico, 2006.
"Performance rating and yardstick competition in social service provision,"
Journal of Public Economics,
Elsevier, vol. 90(3), pages 459-475, February.
- Federico Revelli, 2004. "Performance Rating and Yardstick Competition in Social Service Provision," CESifo Working Paper Series 1270, CESifo Group Munich.
- Magnus Söderberg, 2011.
"The Role Of Model Specification In Finding The Influence Of Ownership And Regulatory Regime On Utility Cost: The Case Of Swedish Electricity Distribution,"
Contemporary Economic Policy,
Western Economic Association International, vol. 29(2), pages 178-190, 04.
- Magnus Söderberg, 2011. "The role of model specification in finding the influence of ownership and regulatory regime on utility cost: the case of Swedish electricity distribution," Post-Print hal-00768606, HAL.
- Rafael Di Tella & Juan Dubra, 2009.
"Anger and Regulation,"
NBER Working Papers
15201, National Bureau of Economic Research, Inc.
- Timothy Besley & Stephen Coate, 2003.
"Elected Versus Appointed Regulators: Theory and Evidence,"
Journal of the European Economic Association,
MIT Press, vol. 1(5), pages 1176-1206, 09.
- Besley, Timothy J. & Coate, Stephen, 2000. "Elected Versus Appointed Regulators: Theory And Evidence," CEPR Discussion Papers 2381, C.E.P.R. Discussion Papers.
- Stephen Coate & Timothy Besley, 2000. "Elected versus Appointed Regulators: Theory and Evidence," NBER Working Papers 7579, National Bureau of Economic Research, Inc.
- Sarah Stafford, 2007. "Can consumers enforce environmental regulations? The role of the market in hazardous waste compliance," Journal of Regulatory Economics, Springer, vol. 31(1), pages 83-107, February.
- Guy Holburn & Richard Bergh, 2006. "Consumer capture of regulatory institutions: The creation of public utility consumer advocates in the United States," Public Choice, Springer, vol. 126(1), pages 45-73, January.
- Lutz, Stefan & Lyon, Thomas P & Maxwell, John W, 1998. "Strategic Quality Choice with Minimum Quality Standards," CEPR Discussion Papers 1793, C.E.P.R. Discussion Papers.
- Andrew Leigh, 2005.
"Economic Voting And Electoral Behavior: How Do Individual, Local, And National Factors Affect The Partisan Choice?,"
Economics and Politics,
Wiley Blackwell, vol. 17, pages 265-296, 07.
- Andrew Leigh, 2005. "Economic Voting and Electoral Behaviour: How do Individual, Local and National Factors Affect the Partisan Choice?," CEPR Discussion Papers 489, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Geoff Edwards & Leonard Waverman, 2006. "The Effects of Public Ownership and Regulatory Independence on Regulatory Outcomes," Journal of Regulatory Economics, Springer, vol. 29(1), pages 23-67, 01.
- Stephen Erfle & Henry McMillan, 1990. "Media, Political Pressure, and the Firm: The Case of Petroleum Pricing in the Late 1970s," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 115-134.
- Olmstead, Alan L & Rhode, Paul, 1985. "Rationing without Government: The West Coast Gas Famine of 1920," American Economic Review, American Economic Association, vol. 75(5), pages 1044-55, December.
- Sara Fisher Ellison & Catherine Wolfram, 2006. "Coordinating on lower prices: pharmaceutical pricing under political pressure," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 324-340, 06.
- Block, Michael K & Feinstein, Jonathan S, 1986. "The Spillover Effect of Antitrust Enforcement," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 122-31, February.
- Gert Brunekreeft, 2004. "Regulatory Threat in Vertically Related Markets: The Case of German Electricity," European Journal of Law and Economics, Springer, vol. 17(3), pages 285-305, May.
- Scott M. Gilpatric & Christian A. Vossler & Michael McKee, 2011. "Regulatory enforcement with competitive endogenous audit mechanisms," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 292-312, 06.
- Dayton M. Lambert & Jason P. Brown & Raymond J.G.M. Florax, 2010.
"A Two-Step Estimator For A Spatial Lag Model Of Counts: Theory, Small Sample Performance And An Application,"
10-5, Purdue University, College of Agriculture, Department of Agricultural Economics.
- Lambert, Dayton M. & Brown, Jason P. & Florax, Raymond J.G.M., 2010. "A two-step estimator for a spatial lag model of counts: Theory, small sample performance and an application," Regional Science and Urban Economics, Elsevier, vol. 40(4), pages 241-252, July.
- Bordignon, Massimo & Cerniglia, Floriana & Revelli, Federico, 2003. "In search of yardstick competition: a spatial analysis of Italian municipality property tax setting," Journal of Urban Economics, Elsevier, vol. 54(2), pages 199-217, September.
- de Fraja, Giovanni & Delbono, Flavio, 1989. "Alternative Strategies of a Public Enterprise in Oligopoly," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 302-11, April.
- Paul Joskow, 2005. "Regulation and Deregulation after 25 Years: Lessons Learned for Research in Industrial Organization," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 26(2), pages 169-193, December.
- Driffield, Nigel & Ioannidis, Christos, 2000. "Effectiveness and effects of attempts to regulate the UK petrol industry," Energy Economics, Elsevier, vol. 22(3), pages 369-381, June.
- Chisari Omar & Kessides Ioannis N., 2009. "Pricing Dynamics of Network Utilities in Developing Countries," Review of Network Economics, De Gruyter, vol. 8(3), pages 1-21, September.
- Mobley, Lee R., 2003. "Estimating hospital market pricing: an equilibrium approach using spatial econometrics," Regional Science and Urban Economics, Elsevier, vol. 33(4), pages 489-516, July.
- Lee, Lung-fei & Yu, Jihai, 2010. "Some recent developments in spatial panel data models," Regional Science and Urban Economics, Elsevier, vol. 40(5), pages 255-271, September.
- Magnus Söderberg, 2008.
"Uncertainty and regulatory outcome in the Swedish electricity distribution sector,"
European Journal of Law and Economics,
Springer, vol. 25(1), pages 79-94, February.
- Magnus Söderberg, 2008. "Uncertainty and regulatory outcome in the Swedish electricity distribution sector," Post-Print hal-00869800, HAL.
- Göran Therborn & K.C. Ho, 2009. "Introduction," City, Taylor & Francis Journals, vol. 13(1), pages 53-62, March.
- Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
- Harry H. Kelejian & Ingmar R. Prucha, 2008.
"Specification and Estimation of Spatial Autoregressive Models with Autoregressive and Heteroskedastic Disturbances,"
CESifo Working Paper Series
2448, CESifo Group Munich.
- Kelejian, Harry H. & Prucha, Ingmar R., 2010. "Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances," Journal of Econometrics, Elsevier, vol. 157(1), pages 53-67, July.
- Per Pettersson-Lidbom, 2008. "Do Parties Matter for Economic Outcomes? A Regression-Discontinuity Approach," Journal of the European Economic Association, MIT Press, vol. 6(5), pages 1037-1056, 09.
- Amihai Glazer & Henry McMillan, 1992. "Pricing by the Firm Under Regulatory Threat," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 1089-1099.
- Matsumura, Toshihiro, 1998. "Partial privatization in mixed duopoly," Journal of Public Economics, Elsevier, vol. 70(3), pages 473-483, December.
- Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area – a summary of the IPN evidence," Occasional Paper Series 46, European Central Bank.
- J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar Publishing.
- Brueckner, Jan K., 1998. "Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls," Journal of Urban Economics, Elsevier, vol. 44(3), pages 438-467, November.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00659458. 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: (CCSD)
If references are entirely missing, you can add them using this form.