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Please use this identifier to cite or link to this item: http://hdl.handle.net/2108/164

Title: On the effects of regulating price discrimination by a price capped firm
Authors: Iozzi, Alberto
Pace, Carla
Sestini, Roberta
Valentini, Edilio
Issue Date: Sep-2001
Publisher: CEIS
Series/Report no.: Quaderni CEIS; 149
Abstract: This paper analyses how regulation of price discrimination by a price capped firm can affect its pricing decision and the entry decision by potential competitors. We focus on two regulatory regimes. A first regime (Absolute) is given by the combination of a average price cap and an additional constraint on the absolute price level in the monopolistic markets. An alternative regime (Relative) entails, along with the price cap constraint, a constraint on the ratio between prices in monopolistic and captive markets. The main findings of the paper are as follows. When entry may only occur at a given scale, the Relative regime generally grants higher likelihood of entry at a given scale. The Relative regime is welfare-superior when, differently than the Absolute regime, is able to foster entry. However, when entry occurs under both regimes, the Absolute regime brings about (weakly) higher social welfare. This last result is reversed when the scale of entry is endogenously chosen. When entry...
URI: http://hdl.handle.net/2108/164
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