Price-Capping regulation as a protectionist strategy in developing countries

Peter Lawrence () and Arijit Mukherjee

No 132, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: In developing countries undergoing liberalising reforms, there are typically local incumbents facing the loss of protection. Strategic lobbying by such firms for a price-capping regulatory regime can deter entry. We show that a regulatory price can be set such that the net profit of the entrant is lower than the entry cost thus deterring entry and that it is possible for the profit of the incumbent to be greater under regulation than under unregulated duopoly. We consider the case of multiple incumbents threatened by entry and also extend our analysis to incorporate lobbying by the entrant.

Keywords: entrant; incumbent; lobbying; price-capping regulation (search for similar items in EconPapers)
JEL-codes: L11 L41 L51 (search for similar items in EconPapers)
Date: 2003-06-04
New Economics Papers: this item is included in nep-dev
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Related works:
Working Paper: Price-Capping Regulation as a Protectionist Strategy in Developing Countries (2002)
Working Paper: Price-Capping Regulation as a Protectionist Strategy in Developing Countries (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ecj:ac2003:132

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