Pricing Discretion and Price Regulation in Competitive Industries

Alberto Iozzi, Roberta Sestini and Edilio Valentini

Journal of Regulatory Economics, 2006, vol. 29, issue 2, 165 pages

Abstract: Price capped firms enjoy a large degree of pricing discretion, which may harm customers and competition. We study two alternative regulatory regimes to limit it: the first regime (Absolute) places a fixed upper limit to the prices charged in captive markets, while the other regime (Relative) constrains the captive prices relatively to the competitive ones. Under the Relative regime, captive prices are only weakly lower and competitive prices are always higher than under the Absolute regime. However, the number of competitors and/or their output may be higher under the Relative regime. While the effects on aggregate welfare are ambiguous, there is some evidence that the Relative regime is more likely to increase consumers’ surplus and social welfare the more efficient are the competitors. Copyright Springer Science+Business Media, Inc. 2006

Keywords: Price regulation; Pricing discretion; Competition; L13; L50 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s11149-006-6033-4 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Pricing Discretion and Price Regulation in Competitive Industries (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:regeco:v:29:y:2006:i:2:p:151-165

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11149/PS2

DOI: 10.1007/s11149-006-6033-4

Access Statistics for this article

Journal of Regulatory Economics is currently edited by Menaham Spiegel

More articles in Journal of Regulatory Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().