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The welfare impacts of discriminatory price tariffs

Nikolaos Danias and J. Kim Swales

Energy Economics, 2018, vol. 71, issue C, 321-331

Abstract: This paper examines the use of asymmetric tariffs as a regulatory instrument. A monopoly setup is adopted in which the firm sells in two markets but price controls are introduced in just one. The regulator's objective is to increase consumer welfare through this price discriminatory practice, with the firm operating under a profit constraint. We consider cases where consumer welfare in the two markets is weighted both equally and unequally and also cases where the cost of supplying the two retail markets is determined in a monopsonistic input market. The results suggest that in certain situations controlling prices in only one market could be a desirable option from a welfare perspective.

Keywords: Monopoly; Asymmetric regulation; Tariffs; Welfare (search for similar items in EconPapers)
JEL-codes: D42 D61 I31 I38 L12 L51 (search for similar items in EconPapers)
Date: 2018
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