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A practical approach to quality-adjusted price cap regulation

Kevin Currier

Telecommunications Policy, vol. 31, issue 8-9, 493-501

Abstract: Price cap regulation is often combined with service quality regulation since price caps may create incentives for quality degradation. A service quality adjustment factor (the Q-Factor) in the price cap formula ensures that allowed prices fall as quality declines. This paper discusses some considerations in determining the appropriate form of the Q-Factor. The paper examines the difficulties involved in exploiting the price/quality tradeoff. In addition, the paper presents a quality-corrected price cap procedure--possessing desirable properties--that can be implemented with reasonable informational requirements.

Keywords: Telecommunications; regulation; Price; caps; Service; quality; adjustment; factor (search for similar items in EconPapers)
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