Abstract
The probability of a deregulation under anti-monopoly consumer lobby is generated at the Cournot-Nash equilibrium of a lobbying game which depends on the monopoly rent and the deadweight loss. This probability is increasing and convex in monopoly price. When the deregulation probability constraint is binding, the monopolist's price rises with the number of consumers, the competitive price and the given ceiling probability. The social cost of a monopoly under franchise contestability differs from the Posner measure.
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The author is grateful for financial support from the Faculty Recruitment Program (FRP) funded by the Ford and Rockefeller Foundations for financial support.
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Fabella, R.V. Consumer resistance and monopoly behavior under franchise contestability. Public Choice 76, 263–271 (1993). https://doi.org/10.1007/BF01049324
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DOI: https://doi.org/10.1007/BF01049324