Matsukawa, Isamu (2006): Regulating a Monopoly Offering Priority Service.
Download (224Kb) | Preview
This paper investigates the effects of alternative forms of regulation on the market penetration and capacity, which are determined by a profit-maximizing monopolist providing priority service to consumers. For continuous priority service, a minimum reliability standard, price cap and rate of return regulation lead to larger capacity than in the absence of regulation. A minimum reliability standard reduces the market penetration while price cap and rate of return regulation increase it. The regulatory effects on the market penetration and capacity are also examined for discrete priority service, and policy implications of these effects are discussed for electricity supply industry.
|Item Type:||MPRA Paper|
|Original Title:||Regulating a Monopoly Offering Priority Service|
|Keywords:||priority service; monopoly; minimum reliability standard; price cap; rate of return regulation|
|Subjects:||L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation|
|Depositing User:||Isamu Matsukawa|
|Date Deposited:||01. Dec 2006|
|Last Modified:||25. Feb 2013 11:57|
Armstrong, M., et al. Regulatory reform: economic analysis and British experience. MIT Press: Cambridge, Massachusetts; 1994.
Besanko, D., Donnenfeld, S. Rate of return regulation and product variety. Journal of Public Economics 1988; 36; 293-304.
Besanko, D. et al. Monopoly and quality distortion: effects and remedies. Quarterly Journal of Economics 1987; 102; 43-767.
Braton, J. Transmission pricing in Norway. Utilities Policy 1997; 6; 219-226.
Chao, H. et al. Priority service: market structure and competition. In: Munasinghe, M. et al. (eds), Special issue on electricity reliability, Energy Journal 1988; 9; 77-104.
Chao, H., Peck, S. Reliability management in competitive electricity markets. Journal of Regulatory Economics 1998; 14; 189-200.
Chao, H., Wilson, R. Priority service: pricing, investment and market organization. American Economic Review 1987; 77; 899-916.
Crew, M. and Fernando, C. Pricing priority service: theory versus utility practice. In:Crew, M. (ed.), Incentive regulation for pubic utilities, Kluwer Academic Publishers: Boston; 1994, 125-142.
Crew, M. and Kleindorfer, P. Reliability and public utility pricing. American Economic Review 1978; 68; 31-40.
Crew, M. and Kleindorfer, P. Public-utility regulation and reliability with applications to electric utilities. In: Crew, M. (ed.), Issues in public-utility pricing and regulation, Lexington Books: Massachusetts; 1980, 51-75.
Deng, S., Oren, S. Priority network access pricing for electric power. Journal of Regulatory Economics 2001; 19; 239-270.
Gronli, H. The Norwegian and Nordic power sectors. In: Rothwell, G., Gomez, T. (eds.), Electricity economics, IEEE Press: Canada; 2003, 161-186.
Harris, M. and Raviv, A. A theory of monopoly pricing schemes with demand uncertainty.American Economic Review 1981; 71; 347-365.
Joskow, P. Patterns of transmission investment. MIT CEEPR Working paper No. 4, 2005.
Joskow, P., Tirole, J. Reliability and competitive electricity markets.RAND Journal of Economics 2006 (forthcoming).
Munasinghe, M. and Gellerson, M. Economic criteria for optimizing power system reliability levels. Bell Journal of Economics 1979; 10; 353-365.
Rothwell, G., Gomez, T. The Spanish power sector. In: Rothwell, G., Gomez, T. (eds.), Electricity economics, IEEE Press: Canada; 2003, 187-215.
Rudnick, H., Raineri, R. Transmission pricing practices in South America. Utilities Policy 1997; 6; 211-218.
Smith, S. Efficient menu structures for pricing interruptible electric power service. Journal of Regulatory Economics 1989; 1; 203-223.
Spulber, D. Capacity-contingent nonlinear pricing by regulated firms. Journal of Regulatory Economics 1992; 4; 299-319.
Spulber, D. Monopoly pricing of capacity usage under asymmetric information. Journal of Industrial Economics 1993; 41; 241-257.
Tahvanainen, K., et al. Quality regulation in electricity distribution business. Nordic Distribution and Asset Management Conference 2004; August 23-24; Espoo, Finland.
Tan, C. and Varaiya, P. Interruptible electric power service contracts. Journal of Economic Dynamics and Control 1993; 17; 495-517.
Telson, M. The economics of alternative levels of reliability for electric power generation systems. Bell Journal of Economics 1975; 6; 679-694.
Tschirhart, J. and Jen, F. Behavior of a monopoly offering interruptible service. Bell Journal of Economics 1979; 10; 244-258.
Viswanathan, N., Tse, E. Monopolistic provision of congested service with incentive-based allocation of priorities. International Economic Review 1989; 30; 153-174.
Wilson, R. Efficient and competitive rationing. Econometrica 1989; 57; 1-40.
Wilson, R. Ramsey pricing of priority service. Journal of Regulatory Economics 1989; 1; 189-202.
Woo, C. et al. Reliability differentiation of electricity transmission. Journal of Regulatory Economics 1998; 13; 277-292.
Woo, C. and Toyama, N. Service reliability and the optimal interruptible rate option in residential electricity pricing. Energy Journal 1986; 7; 123-136.
Young, E. A look back at the long path to mandating electric reliability standards through the Energy Policy Act of 2005. Electricity Journal 2006; 19; 11-23.