Efficient Versus 'Popular' Tariffs for Regulated Monopolies

Posted: 26 Oct 1999

See all articles by Thomas Randolph Beard

Thomas Randolph Beard

Auburn University - Department of Economics

Henry Thompson

Auburn University - Department of Economics

Abstract

This article analyzes the effects of the popular election of a monopoly regulator on the structure of the resulting price system. Consumers are differentiated by income and vote on a regulator who implements a two-part tariff for all consumers. The structure of the winning tariff depends on the curvature properties of consumer Engel curves. When Engel curves are concave in wealth or income, the most popular tariff involves an excessive fixed charge and pricing below marginal cost. This result contributes to understanding observed anomalies in public utility pricing. Generalizations and extensions of the analysis are discussed.

JEL Classification: G21

Suggested Citation

Beard, Thomas Randolph and Thompson, Henry, Efficient Versus 'Popular' Tariffs for Regulated Monopolies. JOURNAL OF BUSINESS Vol 59 No 1, January 1996. Available at SSRN: https://ssrn.com/abstract=6805

Thomas Randolph Beard

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

Henry Thompson (Contact Author)

Auburn University - Department of Economics ( email )

Economics Department
Auburn, AL 36849-5242
United States
334-844-2910 (Phone)
334-844-5639 (Fax)

HOME PAGE: http://www.auburn.edu/~thomph1

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