Network regulation using an agent
The general complexity of demand interrelationships including the co-existence of complements and substitutes make traditional methods of regulating network industries problematic. Collusive pricing is preferred to independent pricing on complementary sections of a network whilst the reverse is true where goods/services are substitutes. However, the costs of market failure in the context of complementary goods, in particular, make appropriate regulatory involvement in such industries all the more important. In this paper, we explore alternative competitive and regulatory strategies within a simple theoretical network with differentiated demands. We show that the employment of an independent profit-maximising agent may offer a partial solution to the problem of network regulation, yielding outcomes which involve all parties pursuing their own interests yet being desirable to both firms and a welfare-maximising social planner.
|Date of creation:||Feb 2007|
|Date of revision:||Feb 2007|
|Contact details of provider:|| Postal: 9 Mappin Street, SHEFFIELD, S1 4DT|
Phone: +44 114 222 3399
Fax: + 44 (0)114 222 3458
Web page: http://www.shef.ac.uk/economics
More information through EDIRC
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.:
- McHardy, Jolian & Trotter, Stephen, 2006. "Competition and deregulation: Do air passengers get the benefits?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 40(1), pages 74-93, January.
- Else, P. K. & James, T. J., 1995. "Privatisation and the quality of rail services," Transportation Research Part A: Policy and Practice, Elsevier, vol. 29(6), pages 387-400, November.
- Jolian Mchardy, 2006. "Complementary Monopoly And Welfare: Is Splitting Up So Bad?," Manchester School, University of Manchester, vol. 74(3), pages 334-349, 06.
- Economides, Nicholas & Salop, Steven C, 1992. "Competition and Integration among Complements, and Network Market Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 105-23, March.
When requesting a correction, please mention this item's handle: RePEc:shf:wpaper:2007004. 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: (Jacob Holmes)
If references are entirely missing, you can add them using this form.