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Quality-Adjusted Laspeyres Price Caps: A Graphical Analysis

Kevin Currier

Atlantic Economic Journal, 2006, vol. 34, issue 4, 490 pages

Abstract: The strong incentive to reduce costs under price cap regulation may create incentives for a regulated firm to reduce delivered service quality levels. Corrective measures, such as service quality standards or a service quality adjustment factor in the price cap formula may mitigate against this tendency. In this paper, we explore the properties of a regulatory scheme in which a Laspeyres index of prices and qualities is employed by the regulator. Copyright International Atlantic Economic Society 2006

Keywords: monopoly regulation; Laspeyres price caps; service quality; L43 (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1007/s11293-006-9041-y

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Handle: RePEc:kap:atlecj:v:34:y:2006:i:4:p:481-490