The Investment Effects of Price Caps under Imperfect Competition: A Note

Economics Letters 106(2), 2010, 92-94

11 Pages Posted: 5 Sep 2008 Last revised: 25 Mar 2020

See all articles by Stefan Buehler

Stefan Buehler

University of St. Gallen - SEPS: Economics and Political Sciences

Anton Burger

Vienna University of Economics and Business

Robert Ferstl

Oesterreichische Nationalbank (OeNB)

Date Written: 2010

Abstract

This note analyzes a simple Cournot model where firms choose outputs and capacities facing varying demand and price-cap regulation. We find that binding price caps set above long-run marginal cost increase (rather than decrease) aggregate capacity investment.

Keywords: capacity, investment, Cournot competition, price cap

JEL Classification: D24, D43, L13, L51

Suggested Citation

Buehler, Stefan and Burger, Anton and Ferstl, Robert, The Investment Effects of Price Caps under Imperfect Competition: A Note (2010). Economics Letters 106(2), 2010, 92-94, Available at SSRN: https://ssrn.com/abstract=1263293 or http://dx.doi.org/10.2139/ssrn.1263293

Stefan Buehler (Contact Author)

University of St. Gallen - SEPS: Economics and Political Sciences ( email )

FGN-HSG
Varnbuelstr. 19
CH-9000 St. Gallen
Switzerland
+41-71-224-2303 (Phone)

Anton Burger

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Robert Ferstl

Oesterreichische Nationalbank (OeNB) ( email )

Otto-Wagner-Platz 3, PO Box 61
Vienna,
1010 Vienna, A-1011
Austria

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