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A Test for Natural Monopoly in Iranian Electricity Distribution Industry: A Panel Random Coefficients Model Analysis

Sayed Mohamad Mirhashemi Dehnavi (), Ahmad Sadraei Javaheri (), Hossein Marzban () and Sayed Morteza Mirdehghan ()
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Sayed Mohamad Mirhashemi Dehnavi: Ph.D. Candidate in Economics, Shiraz University
Ahmad Sadraei Javaheri: Associate Professor of Economics, Shiraz University
Hossein Marzban: Associate Professor of Economics, Shiraz University
Sayed Morteza Mirdehghan: Associate Professor of Mathematics, Shiraz University

Quarterly Journal of Applied Theories of Economics, 2017, vol. 4, issue 1, 119-148

Abstract: In economics, natural monopoly is described as a situation in which, for structural reasons, only one firm finds it profitable to produce in the market. This Concept is more important and more practical in Industries that faced price and non-price regulation such as water, gas and electricity distribution and telecommunication. In this study natural monopoly structure in Iranian electricity distribution was investigated. To this, a Translog cost function was employed. Relative capital price, relative other input price and customer electricity sales were assumed as input price vector and output, respectively. In order to estimate the second order approximation of Translog cost function, the random coefficient model in panel data and the data of 2004 till 2014 were used. The results showed the existence of natural monopoly in some companies in contrast to other.

Keywords: Natural monopoly; Economies of scale. Iranian electricity distribution companies; Translog cost function; Random coefficient model in panel data (search for similar items in EconPapers)
JEL-codes: C13 C23 D40 L94 (search for similar items in EconPapers)
Date: 2017
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