IDEAS home Printed from https://ideas.repec.org/a/bla/buecrs/v59y2007i3p255-268.html
   My bibliography  Save this article

Quality‐Corrected Price Caps

Author

Listed:
  • Kevin M. Currier

Abstract

Although price caps have desirable efficiency properties, it is well known that they may create incentives for a regulated firm to attempt to lower its costs via reductions in service quality. Thus, the regulators often employ quality standards or other methods designed to have allowed prices reflect delivered service quality levels. In this paper, we present a system of quality‐corrected price caps that results in efficient pricing and quality provision.

Suggested Citation

  • Kevin M. Currier, 2007. "Quality‐Corrected Price Caps," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 255-268, July.
    • Handle: RePEc:bla:buecrs:v:59:y:2007:i:3:p:255-268
    DOI: 10.1111/j.0307-3378.2007.00261.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.0307-3378.2007.00261.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.0307-3378.2007.00261.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Vasington Paul B., 2003. "Incentive Regulation in Practice: A Massachusetts Case Study," Review of Network Economics, De Gruyter, vol. 2(4), pages 1-15, December.
    2. Weisman, Dennis L., 2005. "Price regulation and quality," Information Economics and Policy, Elsevier, vol. 17(2), pages 165-174, March.
    3. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-147, June.
    4. Gianni De Fraja & Alberto Iozzi, 2008. "The Quest for Quality: A Quality Adjusted Dynamic Regulatory Mechanism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(4), pages 1011-1040, December.
    5. David Sappington, 2005. "Regulating Service Quality: A Survey," Journal of Regulatory Economics, Springer, vol. 27(2), pages 123-154, November.
    6. Ingo Vogelsang & Jorg Finsinger, 1979. "A Regulatory Adjustment Process for Optimal Pricing by Multiproduct Monopoly Firms," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 157-171, Spring.
    7. Vogelsang, Ingo, 2002. "Incentive Regulation and Competition in Public Utility Markets: A 20-Year Perspective," Journal of Regulatory Economics, Springer, vol. 22(1), pages 5-27, July.
    8. A. Michael Spence, 1975. "Monopoly, Quality, and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 417-429, Autumn.
    9. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cesi Berardino & Iozzi Alberto & Valentini Edilio, 2012. "Regulating Unverifiable Quality by Fixed-Price Contracts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-39, September.
    2. Kevin Currier, 2011. "Optimal Pricing and Entry Rules When a Regulated Dominant Firm Faces a Competitive Fringe," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(4), pages 465-475, November.
    3. repec:kap:iaecre:v:17:y:2011:i:4:p:465-475 is not listed on IDEAS
    4. Resende, Marcelo & Cardoso, Vicente, 2019. "Mapping service quality in electricity distribution: An exploratory study of Brazil," Utilities Policy, Elsevier, vol. 56(C), pages 41-52.
    5. Alessandro Petretto, 2008. "The impact of productive efficiency and quality of a regulated local public utility on final goods prices and consumers welfare," Working Papers - Economics wp2008_10.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    6. Alessandro Petretto, 2009. "On the Impact of Productive Efficiency and Quality of a Regulated Local Public Utility Upon Final Goods Prices and Consumer's Welfare," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 68(3), pages 311-339, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    2. Kevin Currier, 2006. "Quality-Adjusted Laspeyres Price Caps: A Graphical Analysis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 34(4), pages 481-490, December.
    3. Cesi Berardino & Iozzi Alberto & Valentini Edilio, 2012. "Regulating Unverifiable Quality by Fixed-Price Contracts," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-39, September.
    4. David Sappington & Dennis Weisman, 2010. "Price cap regulation: what have we learned from 25 years of experience in the telecommunications industry?," Journal of Regulatory Economics, Springer, vol. 38(3), pages 227-257, December.
    5. Gianni De Fraja & Alberto Iozzi, 2008. "The Quest for Quality: A Quality Adjusted Dynamic Regulatory Mechanism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(4), pages 1011-1040, December.
    6. Angela S. Bergantino & Etienne Billette De Villemeur & Annalisa Vinella, 2011. "Partial Regulation in Vertically Differentiated Industries," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(2), pages 255-287, April.
    7. Ingo Vogelsang, 2012. "Incentive Regulation, Investments and Technological Change," Chapters, in: Gerald R. Faulhaber & Gary Madden & Jeffrey Petchey (ed.), Regulation and the Performance of Communication and Information Networks, chapter 4, Edward Elgar Publishing.
    8. repec:kap:iaecre:v:17:y:2011:i:4:p:465-475 is not listed on IDEAS
    9. T. Jamasb & R. Nepal, 2015. "Issues and Options in the Economic Regulation of European Network Security," Competition and Regulation in Network Industries, Intersentia, vol. 16(1), pages 2-23, March.
    10. Stéphane Auray & Thomas Mariotti & Fabien Moizeau, 2011. "Dynamic regulation of quality," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 246-265, June.
    11. Kevin Currier, 2005. "Combining Pricing Bands with Price Cap Regulation," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-4.
    12. Gianni De Fraja & Alberto Iozzi, "undated". "Short Term and Long Term Effects of Price Cap Regulation," Discussion Papers 00/61, Department of Economics, University of York.
    13. Jörg Borrmann, 2003. "A Simple Characterization of the Second‐best Two‐part and Block‐rate Tariffs Theory and Applications," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 74(2), pages 205-228, June.
    14. Paula Sarmento & António Brandão, 2007. "Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(1), pages 19-34, February.
    15. Valentini, Edilio, 2015. "Indirect taxation, public pricing and price cap regulation: A synthesis," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-39.
    16. Stéphane Auray & Thomas Mariotti & Fabien Moizeau, 2006. "Dynamic Regulation of Public Good Quality," Cahiers de recherche 0610, CIRPEE.
    17. Kevin Currier, 2005. "Strategic Firm Behavior Under Average-Revenue-Lagged Regulation," Journal of Regulatory Economics, Springer, vol. 27(1), pages 67-79, September.
    18. Ingo Vogelsang, 2003. "Price Regulation of Access to Telecommunications Networks," Journal of Economic Literature, American Economic Association, vol. 41(3), pages 830-862, September.
    19. repec:kap:iaecre:v:13:y:2007:i:1:p:19-34 is not listed on IDEAS
    20. Luigi Benfratello & Alberto Iozzi & Paola Valbonesi, 2009. "Technology and incentive regulation in the Italian motorways industry," Journal of Regulatory Economics, Springer, vol. 35(2), pages 201-221, April.
    21. Schober, Dominik & Weber, Christoph, 2015. "Refinancing under yardstick regulation with investment cycles: The case of long-lived electricity network assets," ZEW Discussion Papers 15-065, ZEW - Leibniz Centre for European Economic Research.
    22. Timothy Brennan, 2010. "Decoupling in electric utilities," Journal of Regulatory Economics, Springer, vol. 38(1), pages 49-69, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:buecrs:v:59:y:2007:i:3:p:255-268. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0307-3378 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.