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Regulating a Monopoly Offering Priority Service

  • Matsukawa, Isamu

This paper investigates the effects of alternative forms of regulation on the market penetration and capacity, which are determined by a profit-maximizing monopolist providing priority service to consumers. For continuous priority service, a minimum reliability standard, price cap and rate of return regulation lead to larger capacity than in the absence of regulation. A minimum reliability standard reduces the market penetration while price cap and rate of return regulation increase it. The regulatory effects on the market penetration and capacity are also examined for discrete priority service, and policy implications of these effects are discussed for electricity supply industry.

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File URL: http://mpra.ub.uni-muenchen.de/991/1/MPRA_paper_991.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 991.

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Date of creation: 17 Nov 2006
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Handle: RePEc:pra:mprapa:991
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  1. Paul L. Joskow, 2005. "Patterns of Transmission Investment," Working Papers 0504, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  2. Chi-Keung Woo & Nate Toyama, 1986. "Service Reliability and the Optimal Interruptible Rate Option in Residential Electricity Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 123-136.
  3. Paul Joskow & Jean Tirole, 2004. "Reliability and Competitive Electricity Markets," Working Papers 0408, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  4. Chao, Hung-po & Wilson, Robert, 1987. "Priority Service: Pricing, Investment, and Market Organization," American Economic Review, American Economic Association, vol. 77(5), pages 899-916, December.
  5. Wilson, Robert B, 1989. "Efficient and Competitive Rationing," Econometrica, Econometric Society, vol. 57(1), pages 1-40, January.
  6. Viswanathan, Nagarathnam & Tse, Edison T S, 1989. "Monopolistic Provision of Congested Service with Incentive-Based Allocation of Priorities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 153-74, February.
  7. Deng, Shi-Jie & Oren, Shmuel S, 2001. "Priority Network Access Pricing for Electric Power," Journal of Regulatory Economics, Springer, vol. 19(3), pages 239-70, July.
  8. Hung-po Chao & Shmuel S. Oren & Stephen A. Smith & Robert B. Wilson, 1988. "Priority Service: Market Structure and Competition," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 77-104.
  9. Woo, Chi-Keung & Horowitz, Ira & Martin, Jennifer, 1998. "Reliability Differentiation of Electricity Transmission," Journal of Regulatory Economics, Springer, vol. 13(3), pages 277-92, May.
  10. Chao, Hung-Po & Peck, Stephen C, 1998. "Reliability Management in Competitive Electricity Markets," Journal of Regulatory Economics, Springer, vol. 14(2), pages 189-200, September.
  11. Tan, Chin-Woo & Varaiya, Pravin, 1993. "Interruptible electric power service contracts," Journal of Economic Dynamics and Control, Elsevier, vol. 17(3), pages 495-517, May.
  12. Smith, Stephen A, 1989. "Efficient Menu Structures for Pricing Interruptible Electric Power Service," Journal of Regulatory Economics, Springer, vol. 1(3), pages 203-23, September.
  13. Besanko, David & Donnenfeld, Shabtai, 1988. "Rate of return regulation and product variety," Journal of Public Economics, Elsevier, vol. 36(3), pages 293-304, August.
  14. Harris, Milton & Raviv, Artur, 1981. "A Theory of Monopoly Pricing Schemes with Demand Uncertainty," American Economic Review, American Economic Association, vol. 71(3), pages 347-65, June.
  15. Besanko, David & Donnenfeld, Shabtai & White, Lawrence J, 1987. "Monopoly and Quality Distortion: Effects and Remedies," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 743-67, November.
  16. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, June.
  17. John Tschirhart & Frank Jen, 1979. "Behavior of a Monopoly Offering Interruptible Service," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 244-258, Spring.
  18. Spulber, Daniel F, 1993. "Monopoly Pricing of Capacity Usage under Asymmetric Information," Journal of Industrial Economics, Wiley Blackwell, vol. 41(3), pages 241-57, September.
  19. Spulber, Daniel F, 1992. "Capacity-Contingent Nonlinear Pricing by Regulated Firms," Journal of Regulatory Economics, Springer, vol. 4(4), pages 299-319, December.
  20. Wilson, Robert, 1989. "Ramsey Pricing of Priority Service," Journal of Regulatory Economics, Springer, vol. 1(3), pages 189-202, September.
  21. Mohan Munasinghe & Mark Gellerson, 1979. "Economic Criteria for Optimizing Power System Reliability Levels," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 353-365, Spring.
  22. Rudnick, Hugh & Raineri, Ricardo, 1997. "Transmission pricing practices in South America," Utilities Policy, Elsevier, vol. 6(3), pages 211-218, September.
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