Implicit yardstick competition between heating monopolies in urban areas: Theory and evidence from Sweden

Petyo Bonev, Matthieu Glachant and Magnus Söderberg

Energy Economics, 2022, vol. 109, issue C

Abstract: This article examines a novel regulatory mechanism in a setting with multiple local monopolists. The mechanism rests upon the behavioral assumption that cus- tomers form opinions about prices by comparing them with prices set by nearby mo- nopolies and that this comparison influences their behavior. In this way, an “implicit yardstick competition” emerges among monopolists although they do not operate in the same markets. We test this mechanism using a unique dataset of unregulated district heating monopolists in Sweden. We find a large effect of neighbors’ prices, which indicates that the implicit yardstick competition has a considerable disciplin- ing effect on monopolies’ pricing behavior.

Keywords: Monopoly; Price setting; Spatial interaction; Natural experiment; Yardstick competition (search for similar items in EconPapers)
JEL-codes: L12 L43 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Implicit yardstick competition between heating monopolies in urban areas: Theory and evidence from Sweden (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:109:y:2022:i:c:s0140988322001074

DOI: 10.1016/j.eneco.2022.105927

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