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| Author: | Law, P. |
| Title: | Tighter average revenue regulation can reduce consumer welfare |
| Journal: | Journal of Industrial Economics
1995 : DEC, VOL. 43:4, p. 399-404 |
| Index terms: | INDUSTRIAL ECONOMICS WELFARE CONSUMERS |
| Language: | eng |
| Abstract: | A monopolist producing for two markets is subject to an average revenue constraint (ARC), a form of regulation which is relevant to some UK utilities. Where marginal costs of serving the two markets differ, tighter regulation may cause one of the prices to rise as shown by Bradley and Price (1988). A simple linear example demonstrates that total consumer surplus may fall as regulation becomes more stringent. Various forms of price control have been employed to control the product market power of privatised utilities in the UK. |
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