Regulation through reference prices/Regulación a través de precios de referencia

Alfredo Salgado-Torres

Estudios Económicos, 2024, vol. 39, issue 1, 159-201

Abstract: We analyze the role of reference prices on competition and welfare in a circular city model where paying prices above a reference negatively affects consumers' utility. Agents interact in a three-stage game. First, a policymaker chooses a reference price; second, firms make their entry decision; finally, firms compete in prices while consumers make their consumption decisions. We find that the market price and the optimal reference price always coincide in equilibrium, reducing consumer prices and implying a net welfare gain.

JEL-codes: C7 D4 D9 L1 L2 L5 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:emx:esteco:v:39:y:2024:i:1:p:159-201

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