Price Regulation under Demand Uncertainty
-
Veronika Grimm
und Gregor Zöttl
In this paper we provide a taxonomy of price cap regulation in oligopoly under demand uncertainty. We show that independently of the nature of uncertainty high price caps always increase production and welfare as compared to setting no price cap. We also derive conditions on the demand distribution under which a price cap close to marginal cost can be optimal and when it is not. For demand distributions with an increasing hazard rate we show that price regulation under demand uncertainty can be viewed as a well behaved extension of the analysis for deterministic demand. For this class of distributions we characterize the optimal price cap, which is unique and may or may not be close to marginal cost. Our general framework nests the limit case of deterministic demand as well as results by Earle et al. (2007), who have shown that standard arguments supporting the imposition of price caps may break down in the presence of demand uncertainty.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Artikel in diesem Heft
- Topics Article
- Endogenous Investment and Pricing under Uncertainty
- Information Revelation in Markets with Pairwise Meetings: Complete Revelation in Dynamic Analysis
- Optimal Screening by Risk-Averse Principals
- Coordination under the Shadow of Career Concerns
- The Optimal Accuracy Level in Asymmetric Contests
- The Fragmentation of Reputation
- Sharing Risk Efficiently under Suboptimal Punishments for Defection
- Advice from Multiple Experts: A Comparison of Simultaneous, Sequential, and Hierarchical Communication
- Contractual Incompleteness for External Risks
- On Delegation in Contests and the Survival of Payoff Maximizing Behavior
- Optimal Quality Scores in Sponsored Search Auctions: Full Extraction of Advertisers' Surplus
- A Theory of Credibility under Commitment
- Communication Breakdown: Consultation or Delegation from an Expert with Uncertain Bias
- Social Learning in Social Networks
- A Note on the Multidimensional Monopolist Problem and Intertemporal Price Discrimination
- A Note on Rationalizability and Restrictions on Beliefs
- Vote or Shout
- Asymmetry and Collusion in Sequential Procurement: A "Large Lot Last" Policy
- Status, Inequality and Intertemporal Choice
- Designing the Efficient Information-Processing Organization
- Ensuring Quality Provision through Capacity Regulation under Price Competition
- Successive Oligopolies and Decreasing Returns
- Advice by an Informed Intermediary: Can You Trust Your Broker?
- Advances Article
- Non-Bayesian Learning
- Markets versus Negotiations: The Predominance of Centralized Markets
- Crime Reporting: Profiling and Neighbourhood Observation
- Endogenous Two-Sided Markets with Repeated Transactions
- Position Auctions with Budgets: Existence and Uniqueness
- Walrasian Equilibrium and Reputation under Imperfect Public Monitoring
- Price Regulation under Demand Uncertainty
- Linear Demand Systems are Inconsistent with Discrete Choice
- Contributions Article
- Relative Extinction of Heterogeneous Agents
- Profit-Maximizing Sale of a Discrete Public Good via the Subscription Game in Private-Information Environments
- Kinked-Demand Equilibria and Weak Duopoly in the Hotelling Model of Horizontal Differentiation
- The Role of Replication-Invariance: Two Answers Concerning the Problem of Fair Division When Preferences Are Single-Peaked
- Collusive Behavior of Bidders in English Auctions: A Cooperative Game Theoretic Analysis
- Bad Government Can Be Good Politics: Political Reputation, Negative Campaigning, and Strategic Shirking
- Equilibrium Social Hierarchies: A Non-Cooperative Ordinal Status Game
- Bertrand Competition in Markets with Fixed Costs
- Regular Infinite Economies
- Existence of Competitive Equilibrium in Unbounded Exchange Economies with Satiation: A Note
- Quantifying the Cost of Risk in Consumption
- On a Class of Contest Success Functions
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