Regulating a dominant firm: unknown demand and industry structure

Article Abstract:

Previous studies on government regulation of firms have focused on the monopolistic case. In real life, however, even dominant firms often have rivals. An analysis of optimal regulation policy for a dominant firm with a competing unregulated rival is undertaken. Two cases for the regulator are examined: complete and incomplete information. The results indicate that the dominant firm's price can be set either above or below marginal cost, given complete information. Pooling or separating is the optimal policy under incomplete information.

Research, Monopolies

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Price-cap versus rate-of-return regulation in a stochastic-cost model

Article Abstract:

The effects of the scheduling of regulatory hearings on price-cap and rate-of-return regulation on public utilities were analyzed in a multiperiod stochastic-cost model. The two concepts are synonymous because price-cap regulation applied on privatized utilities is tantamount to rate-of-return regulation. It was concluded that scheduling hearings at definite periods lessened uncertainty and improved welfare. The usage of average costs is a better alternative in measuring social welfare.

ELECTRIC, GAS, AND SANITARY SERVICES, Models, Public utilities, Rate regulation, Stochastic processes

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Middlemen as experts

Article Abstract:

A study was conducted to examine the role of middle men in correctors of market inefficiencies. Thesecommercial agents earn profits by buying goods which they sell at a higher price. These durable goods include cars, jewelry, antiques, coins and stamps. Results show that middle men who develop expertise in their field minimize market inefficiencies where they exist. Thus, they generate a welfare-improvingeffect.

Evaluation, Commercial agents, Middle managers

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