Welfare effects of strategic price setting in anticipation of price regulation
Article Abstract:
The price effects and welfare consequences of a firm's strategic pricing behavior in anticipation of future price caps are examined using a simplified two-period model that assumes naivite of the regulator but capacity for strategic planning by the company. Anticipating future imposition of price caps for a product, a monopolist producer may take a variety of steps to influence current and future pricing. The study finds a strong dependence of welfare effects on the nature of the demand function. Even using a model with severe limitations, however, economists are hard-pressed to draw any unambiguous generalizations about effects on prices and consumer welfare.
Publication Name: Bulletin of Economic Research
Subject: Economics
ISSN: 0307-3378
Year: 1993
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Welfare and monetary precommitment in an economy with menu costs and unionized wage setting
Article Abstract:
A model showing how monetary precommitments can contribute to a welfare advantage assessed in terms of a 'Benthamite' social welfare function is discussed. The model shows that precommitments can achieve price stability without adversely affecting output. However, the model differs from earlier discussions of Barro and Gordon in the sense that the government's objective function is derived from the citizen's utility function, the impact of price stability differs for different individuals and the price structure under conditions of inadequate production is derived from the private sector.
Publication Name: Bulletin of Economic Research
Subject: Economics
ISSN: 0307-3378
Year: 1993
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Welfare effects of pricing in anticipation of Laspeyres price-cap regulation: an example
Article Abstract:
The United Kingdom utilizes the average revenue constraint and the tariff basket constraint in its pricing regulation of Laspeyres index of companies' prices. However critics of the regulation seem to favor more the tariff basket scheme in the regulation of its different industries. The Laspeyres index regulation increases producer welfare but decreases consumer welfare in the first period of a simple two-period model, as compared to the uniform regulation.
Publication Name: Bulletin of Economic Research
Subject: Economics
ISSN: 0307-3378
Year: 1997
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