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Price regulation, product location, and welfare

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Abstract

This paper investigates the imposition of a binding price ceiling and how it affects overall welfare and the location of a monopolist that is price-discriminating between two markets. The analysis shows that the imposition of a price-ceiling induces the monopolist to locate at the regulated market and that the imposition may actually reduce welfare. The setting is extended to a duopoly market. Two types of regulation are considered. The welfare implications of the regulations are discussed.

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Authors and Affiliations

  1. Graduate School of Business Administration, Kobe University, 2-1 Rokkodai, Nada, Kobe, Hyogo, 657-8501, Japan

    Noriaki Matsushima

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  1. Noriaki Matsushima
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Correspondence to Noriaki Matsushima.

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Matsushima, N. Price regulation, product location, and welfare. J Econ 95, 233–253 (2008). https://doi.org/10.1007/s00712-008-0032-0

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  • DOI: https://doi.org/10.1007/s00712-008-0032-0

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