Price Regulation in a Vertically Integrated Natural Gas Industry: The Case of Mexico

Review of Network Economics, Vol. 4, No. 1, March 2005

18 Pages Posted: 14 Apr 2005

See all articles by Dagobert L. Brito

Dagobert L. Brito

Rice University - Department of Economics

Juan Rosellon

Centro de Investigacion y Docencia Economicas

Abstract

The Comision Reguladora de Energia of Mexico has implemented a netback rule for linking the Mexican natural gas price to the Texas natural gas benchmark price in an industry structure characterized by a vertically integrated state-owned monopoly. This paper shows that in an open economy where agents can choose between gas and alternative fuels, and where the density function describing the distribution of agents along the pipeline can have mass points, the netback rule is Pareto optimal.

Keywords: Price regulation, vertical integration, natural gas, Mexico

JEL Classification: L51, L94

Suggested Citation

Brito, Dagobert L. and Rosellon, Juan, Price Regulation in a Vertically Integrated Natural Gas Industry: The Case of Mexico. Review of Network Economics, Vol. 4, No. 1, March 2005. Available at SSRN: https://ssrn.com/abstract=701841

Dagobert L. Brito

Rice University - Department of Economics ( email )

6100 South Main Street
Houston, TX 77005
United States

Juan Rosellon (Contact Author)

Centro de Investigacion y Docencia Economicas ( email )

Carretera Mexico Toluca 3655
01210 Mexico, D.F.
Mexico

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