Price Caps And Output Floors: A Comparison Of Simple Regulatory Rules  

Oleh:

Fraja, Gianni De ; Iossa, Elisabetta

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Economic Journal (EBSCO) vol. 108 no. 450 (Sep. 1998), page 1404-1421.
Fulltext: 1404.pdf (272.95KB)

Isi artikel

We study in this paper a simple alternative to price cap regulation. The mechanism, which we label `output ¯oor' regulation, requires the regulated ®rm to supply a given level of output. This rule is as simple as price cap regulation, and performs identically when the regulated ®rm is a natural monopoly; however, we show that, in the presence of a competitive fringe, output oor regulation yields lower prices and stronger incentives for cost reduction. Its introduction, however, is likely to be resisted by the industry, since it lowers managerial utility and shareholders' pro®ts.

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