Price caps with capacity precommitment

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Show simple item record Lemus Torres, Ana Belén Moreno Ruiz, Diego 2017-09-05T15:49:26Z 2019-07-01T22:00:05Z 2017-01-01
dc.identifier.bibliographicCitation Lemus, A. B., Moreno, D., (2017). Price caps with capacity precommitment. International Journal of Industrial Organization, v.50, pp. 131-158.
dc.identifier.issn 0167-7187
dc.description.abstract We examine the effectiveness of price caps to regulate imperfectly competitive markets in which the demand is uncertain. To that effect, we study a monopoly that makes irreversible capacity investments ex-ante, and then chooses its output up to capacity upon observing the realization of demand. We show that the optimal price cap must trade off the incentives for capacity investment and capacity withholding, and is above the unit cost of capacity. Moreover, while a price cap provides incentives for capacity investment and mitigates market power, it cannot eliminate inefficiencies. Capacity payments provide a useful complementary instrument.
dc.description.sponsorship We gratefully acknowledge financial support from the Ministerio de Ciencia e Innovación, grant ECO2011‐29762.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.publisher Elsevier
dc.rights © Elsevier
dc.rights Atribución-NoComercial-SinDerivadas 3.0 España
dc.subject.other Imperfect competition
dc.subject.other Demand uncertainty
dc.subject.other Price cap regulation
dc.subject.other Capacity investment
dc.subject.other Capacity withholding
dc.subject.other Capacity payment
dc.subject.other Monopoly
dc.title Price caps with capacity precommitment
dc.type article
dc.subject.eciencia Economía
dc.rights.accessRights openAccess
dc.relation.projectID Gobierno de España. ECO2014-55953-P
dc.relation.projectID Gobierno de España. MDM 2014-0431
dc.relation.projectID Comunidad de Madrid. S2015/HUM-3444/MADECO-CM
dc.type.version acceptedVersion
dc.identifier.publicationfirstpage 131
dc.identifier.publicationissue 50
dc.identifier.publicationlastpage 158
dc.identifier.publicationtitle International Journal of Industrial Organization
dc.identifier.uxxi AR/0000020290
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