Dynamic Pricing under Static Regulation:The Case of UBP
Traditional utilities face a dynamic and increasingly competitive environment. Economists have long argued for the benefits of competition in terms of improved efficiency. To obtain these benefits, however, it is important not only that companies change their approach to selling products but also that regulation changes. In this paper, we argue that current forms of regulation—rate-of-return (ROR) and price-cap (PCR)—are based on static foundations that are ill-suited to the situation of consumers and industries facing significant dynamic changes. Our approach is illustrative and intended to encourage further thought on the nature of regulatory institutions under conditions of dynamic change.
KeywordsLocal Service Dynamic Price Public Utility Incentive Regulation Usage Charge
Unable to display preview. Download preview PDF.
- Abbott, Thomas A., and Michael A. Crew. 1993. “Incentives for Efficiency Under ‘Incentive’ Regulation.” Presented at the 7th Annual Western Conference, July 7–9, 1993.Google Scholar
- Averch, H., and L.L. Johnson. 1962. “Behavior of the Firm Under Regulatory Constraint.”American Economic Review 52 (December): 1052–1069.Google Scholar
- Brown, Stephen J., and David S. Sibley. 1986. The Theory of Public Utility Price. New York: Cambridge University Press.Google Scholar
- Crew, Michael A., and Robert E. Dansby. 1982. “Cost-Benefit Analysis of Local Measured Service.” In Regulatory Reform and Public Utilities, edited by M.A. Crew. Lexington, MA: Lexington Books.Google Scholar
- Federal Communications Commission. 1991. Statistics of Communications Common Carriers, 1990/91 Edition. U.S. Government Printing Office, ISBN 0–16–036031–5.Google Scholar
- Littlechild, Stephen C. 1982. Regulation of British Telecommunications Profitability. London: Department of Trade and Industry.Google Scholar
- Lyon, Thomas. 1992. “Incentive Regulation with `Deadbands’ and Sharing Rules.” Unpublished manuscript (April).Google Scholar
- Park, Rollo Edward, and Bridger M. Mitchell. 1987. Optimal Peak Load Pricing for Local Telephone Calls. Santa Monica: Rand Corporation R-3404–1-RC (March).Google Scholar
- Vogelsang, Ingo. 1989. “Price-Cap Regulation of Telecommunications Services: A Long-Run Approach.” In Deregulation and Diversification of Utilities, edited by M.A. Crew. Boston, MA: Kluwer Academic Publishers.Google Scholar