Pricing and Price Regulation in a Customer-Owned Monopoly

38 Pages Posted: 14 Oct 2014

See all articles by Nicola Doni

Nicola Doni

University of Florence - Dipartimento di Scienze Economiche

Pier Angelo Mori

University of Firenze, Department of Economics and Management Sciences

Date Written: September 1, 2014

Abstract

In the first part of the paper we study the pricing policies of a customer-owned firm in the absence of external regulation. The profit-sharing rule is a key element of the price choice and our analysis focuses on the two most common ones, uniform and proportional. The main result is that the self-discipline effect generally ensures the dominance of customer-ownership over investor-ownership in welfare terms, though under neither rule it is enough to attain the first-best in equilibrium. Then, customer-owned firms, like forprofit ones, need some external price regulation. In the second part we address this topic. We show first that the optimal regulatory policies for investor-owned service providers are not optimal for customerowned ones, and hence price regulation is affected by the ownership mode. Another factor that is shown to condition the effectiveness of regulation is the sharing rule. The paper closes with a few results on the optimal regulatory design for customer-owned firms.

Keywords: Customer ownership, public utilities, price regulation

JEL Classification: D71, L11, L33, L51, P13

Suggested Citation

Doni, Nicola and Mori, Pier Angelo, Pricing and Price Regulation in a Customer-Owned Monopoly (September 1, 2014). Euricse Working Papers, 70 | 14, Available at SSRN: https://ssrn.com/abstract=2509202 or http://dx.doi.org/10.2139/ssrn.2509202

Nicola Doni

University of Florence - Dipartimento di Scienze Economiche ( email )

Florence 50127
Italy
++39 055 4374905 (Fax)

Pier Angelo Mori (Contact Author)

University of Firenze, Department of Economics and Management Sciences ( email )

Via delle Pandette 9
Florence, Florence 50132
Italy

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