Coasean Quality of Regulated Goods
B.E. Journal of Economic Analysis & Policy Vol. 16, No. 4, 2016
15 Pages Posted: 6 Nov 2014 Last revised: 6 May 2018
Date Written: June 29, 2016
The quality of goods provided by public utilities depends on infrastructure features and operational inputs. I compare the economic efficiency that results from price ceilings and minimum quality standards (i.e., compliance with environmental, chemical, and performance standards and norms) imposed by a benevolent regulator to a Coasean bargaining solution between a median consumer and a monopolist. When quality is non-excludable and non-rival, rate-of-return regulation yields higher economic efficiency than price cap regulation.
Keywords: Public Goods, Network Infrastructure, Regulation of Quality, Coase Theorem
JEL Classification: H41, H54, L15, L43, L51
Suggested Citation: Suggested Citation