Price-Cap Regulation and Market Definition

Ian Bradley

Journal of Regulatory Economics, 1993, vol. 5, issue 3, 337-47

Abstract: One of the merits claimed for certain types of price-cap regulation is the possible long-run convergence of the prices of multi-product firms to Ramsey prices. Typically such regulated firms define commodities by such devices as dividing the day into discrete periods, customers into age-groups, distances to ranges, and so on. Allowing that such division is endogenous throws doubt on the ability of Laspeyre quantity-based price-caps to encourage an efficient market definition and hence to generate an efficient price structure. Copyright 1993 by Kluwer Academic Publishers

Date: 1993
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