Voting, Spatial Monopoly, and Spatial Price Regulation

Meng-Hua Ye and Anthony Yezer

Economic Inquiry, 1992, vol. 30, issue 1, 29-39

Abstract: Regulations often require that local public utilities engage in high rates of freight absorption. These regulations, often mandating uniform pricing, are shown to arise logically as a consequence of self-interested voting behavior. The authors specifically consider the case of a single-plant spatial monopoly that is regulated by consumers distributed around the plant. Consumers may change their delivered price by voting to require a rate of freight absorption that differs from the profit-maximizing rate. Voting outcomes under a median voter model predict the high rate of freight absorption often observed in practice. Copyright 1992 by Oxford University Press.

Date: 1992
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