Li Ning, Jorge (2009): Second-degree price discrimination and universal access under (weighted average) price cap regulation.
Download (273kB) | Preview
This paper analyzes the efficiency of the Price Cap regulatory scheme and its impact on universal access, when the monopolist is allowed to set a menu of alternative plans as part of a self-selection strategy (second-degree price discrimination) and the cap is calculated as the weighted average of the tariff plans he offers. In this context, we characterized the solution of the monopolist; who, besides offering a menu of plans more distorted than the second-best outcome -even distorting the plan for high-valuation consumers- because the trade-off between efficiency and rents extraction is exhibited in different way, can exclude consumers who are willing to pay for the service -shutdown policy- despite of universal access obligation have been imposed by the regulator. This happens regardless of the weighted average price cap (WAPC) set by the regulator. Consequently, if the Price Cap regulatory scheme is going to be used by the regulator, this mechanism must be applied to a single regulated plan, leaving the monopolist some flexibility to offer alternative plans that will be incentive compatible with this single regulated plan (tariff flexibility).
|Item Type:||MPRA Paper|
|Original Title:||Second-degree price discrimination and universal access under (weighted average) price cap regulation|
|Keywords:||price cap; non-linear tariffs; price discrimination; tariff flexibility; universal access|
|Subjects:||L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L96 - Telecommunications
L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D52 - Incomplete Markets
|Depositing User:||Jorge Li Ning|
|Date Deposited:||07. Jun 2011 23:38|
|Last Modified:||28. Sep 2015 20:13|
Armstrong, M., Cowan, S. and Vickers, J. (1997): Regulatory Reform: Economic Analysis and British Experience. The MIT Press, Cambridge.
Armstrong, M. and D. Sappington (2004): "Toward a Synthesis of Models of Regulatory Policy Design with Limited Information". Journal of Regulatory Economics; 26:1, pp. 5-21.
Armstrong, M. and J. Vickers (1991): "Welfare Effects of Price Discrimination by a Regulated Monopolist". The RAND Journal of Economics; 22:4, pp. 571-580.
Bagh, A. and Bhargava, H. (2006): "Information Structures, Price Discrimination and Demand Uncertainty". Workshop on Information Systems and Economics; Kellog School of Management, Northwestern University.
Baron, D. and R. Myerson (1982): "Regulating a Monopolist with Unknown Costs". Econometrica; 50:4, pp. 911-930.
Bernstein, J., Hernandez, J., Rodriguez, J., and Ros, A. (2006): " X-Factor updating and total factor productivity growth: the case of peruvian telecommunications, 1996-2003". Journal of Regulatory Economics; 30, pp. 316-342.
Bertoletti, P. and C. Polleti (1997): "Welfare Effects of Discriminatory Two-Part Tariffs Constrained by Price Caps". Economics Letters; 56:3, pp. 293-298.
Bradley, I. and Price, C. (1988): "The Economic Regulation of Private Industries by Price Constrains". The Journal of Industrial Economics; 37:1, pp. 99-106.
Laffont, J. and D. Martimort (2002): The Theory of Incentives. Princeton University Press.
Laffont, J. and J. Tirole (1993): A Theory of Incentives in Procurement and Regulation. The MIT Press, Cambridge.
Lambrecht, A., Seim, K. and Skiera, B. (2007): "Does Uncertainty Matter? Consumer Behavior Under Three-Part Tariffs". Marketing Science; 26:5, pp. 698-710.
Li Ning, J. and Willington, M. (2009): "Regulating a Monopoly with Universal Service Obligation: The Role of Flexible Tariff Schemes". Documento de Investigación N° I-197. ILADES-Georgetown University.
Rodríguez, A. (2004): "Perfil de uso y demanda potencial de telfonía en zonas urbano-marginales del Perú". Study made for OSIPTEL - Studies in Telecommunications N°18.
Sappington, D. and D. Sibley (1988): "Regulating without Cost Information: The Incremental Surplus Subsidy Scheme". International Economic Review; 29:2, pp. 297-306.
Sharkey, W. and D. Sibley (1993): "Optimal Non-Linear Pricing with Regulatory Preference over Customer Type". Journal of Public Economics; 50:2, pp. 197-229.
Sibley, D. (1989): "Asymmetric Information, Incentives and Price-Cap Regulation". The RAND Journal of Economics; 20:3, pp. 392-404.
Vogelsang, I. (1989): "Two-Part Tariffs as Regulatory Constraints". Journal of Public Economics; 39:1, pp. 45-66.
Vogelsang, I. (1990): "Optimal Two-Part Tariffs Constrained by Price Caps". Economics Letters; 33:3, pp. 287-292.