The welfare impacts of discriminatory price tariffs

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Abstract

This paper looks at the use of asymmetric tariffs as a regulatory instrument. We use a monopolistic market setup with two markets and we introduce price controls in one of the two. The purpose of the regulator is to maximise consumer welfare through this price discriminatory practice. We consider cases where the welfare of the consumers in the two markets is weighted equally and cases where it is not. In some cases we allow for the two markets to be linked through a monopsonistic input market. The paper focuses on the welfare implications of this regulatory approach, with the firm operating under a profit restriction. Results suggest that having only one price-controlled market is in certain cases a good option from a welfare perspective.
Original languageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-33
Number of pages33
Publication statusPublished - 28 Jun 2016

Publication series

NameDiscussion Papers in Economics
PublisherUniversity of Strathclyde
No.09
Volume16

Keywords

  • monopoly
  • asymmetric regulation
  • tariffs
  • welfare

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