Efficient versus "popular" tariffs for regulated monopolies

Article Abstract:

A recent study examines how the popular election of a monopoly regulator affects the structure of the resulting price system. Findings show that regulators' vote-maximizing behavior results in inherent biases in pricing. If products have the predicted concave Engel curves, equilibrium excessively depends on constant fees, with per-unit charges set lower than the marginal cost. This finding remains with income effects and asymmetric income distribution. These outcomes seem to show that it is possible to have predictable distortions in tariff design for single products. With increases in deregulation and its attendant entry, bottom feeding may end up being a crucial mode of competition in public utilities.

Prices and rates, Pricing, Public utilities, Monopolies

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Deterring fraud: the role of resale price maintenance

Article Abstract:

The role that resale price maintenance (r.p.m.) plays in deterring retailers from free riding on manufacturer's brand name capital is investigated. Retailer schemes that defraud customers, such as misleading price markups, are examined. It is shown that free pricing of merchandise allows retailers to post misleading prices, thereby injuring customers. The use of r.p.m. is shown to be the most effective strategy that manufacturers can use to deter misleading markups.

Analysis, Economic aspects, Retail industry, Retail trade, Ethical aspects, Price control, Price regulations, Markup, Resale price maintenance, Price maintenance

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