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Allocative inefficiency properties of price-cap regulation

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Abstract

The paper deals with the argument that a price-cap regulated firm maximizing profits under the price-cap constraint will set prices that over time approach the Ramsey structure. My analysis explores the effects of price caps on the structure of prices. The results are in important aspects at variance with the claim of convergence to a Ramsey structure.

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Authors and Affiliations

  1. Wik, Research Institute for Communications Services, Rathausplatz 2-4, P.O. 2000, D-5340, Bad Honnef 1, Germany

    Werner Neu

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  1. Werner Neu
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Neu, W. Allocative inefficiency properties of price-cap regulation. J Regul Econ 5, 159–182 (1993). https://doi.org/10.1007/BF01065364

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  • DOI: https://doi.org/10.1007/BF01065364

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