Testing the regulatory threat hypothesis: Evidence from Sweden |
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Institution: | 1. University of St. Gallen, Switzerland;2. MINES ParisTech - PSL, i3 CNRS France;3. University of Southern Denmark, Denmark |
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Abstract: | This study examines whether threat of stricter regulation influences the pricing behavior of firms. Using data on unregulated Swedish local district heating monopolists, we measure the threat level by the number of customer complaints about prices received by a national board. Exploiting a natural experiment, we find that firms reduce prices when customer complaints increase. |
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Keywords: | Regulatory threat Monopoly price setting spatial interaction natural experiment |
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