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Implicit yardstick competition between heating monopolies in urban areas: Theory and evidence from Sweden

Author

Listed:
  • Petyo Bonev

    (HSG - University of St.Gallen)

  • Matthieu Glachant

    (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique)

  • Magnus Söderberg

    (Halmstad University)

Abstract

This article examines a novel regulatory mechanism in a setting with multiple local monopolists. The mechanism rests upon the behavioral assumption that cus- tomers form opinions about prices by comparing them with prices set by nearby mo- nopolies and that this comparison influences their behavior. In this way, an “implicit yardstick competition” emerges among monopolists although they do not operate in the same markets. We test this mechanism using a unique dataset of unregulated district heating monopolists in Sweden. We find a large effect of neighbors’ prices, which indicates that the implicit yardstick competition has a considerable disciplin- ing effect on monopolies’ pricing behavior.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Petyo Bonev & Matthieu Glachant & Magnus Söderberg, 2022. "Implicit yardstick competition between heating monopolies in urban areas: Theory and evidence from Sweden," Post-Print hal-03936302, HAL.
    • Handle: RePEc:hal:journl:hal-03936302
    DOI: 10.1016/j.eneco.2022.105927
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    2. Biggar , Darryl & Söderberg, Magnus, 2024. "Customers’ value-for-money for a regulated service across different owners," Ratio Working Papers 372, The Ratio Institute.

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    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L43 - Industrial Organization - - Antitrust Issues and Policies - - - Legal Monopolies and Regulation or Deregulation

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