Price Caps,Rate of Return Constraints and Universal Service Obligations |
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Authors: | Baake Pio |
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Institution: | (1) Department of Economics, Humboldt University Berlin, Spandauer Str. 1, 10178 Berlin, Germany |
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Abstract: | This paper evaluates the effects of modifying price cap regulation when firms are allowed to use non-linear tariffs. We consider a stylized network industry and analyze price cap regulation combined with rate of return regulation and with a universal service obligation. While both modifications can increase aggregate welfare by reducing the pricing distortions under price cap regulation, a universal service obligation is welfare superior if the firms profits and the size of its network are held constant. |
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