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Combining Pricing Bands with Price Cap Regulation

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  • Kevin Currier

    (Oklahoma State University)

Abstract

Within the context of natural monopoly regulation, price cap schemes are often combined with price bands in which a maximum percentage by which the price in a market can be raised or lowered is stipulated. In this note, we examine the feasibility of combining average-revenue-lagged and Laspeyres price cap regulation with price band regulation. Specifically, we study the impact of pricing bands on the known efficiency properties of these two price cap schemes.

Suggested Citation

  • Kevin Currier, 2005. "Combining Pricing Bands with Price Cap Regulation," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-4.
    • Handle: RePEc:ebl:ecbull:eb-04l50004
    as

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    References listed on IDEAS

    as
    1. Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-147, June.
    2. Cowan, Simon, 1997. "Price-Cap Regulation and Inefficiency in Relative Pricing," Journal of Regulatory Economics, Springer, vol. 12(1), pages 53-70, July.
    3. 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.
    4. 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.
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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy

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