How Efficient is a Contestable Natural Monopoly?

Arbeitspapier

This paper considers the efficiency of a contestable natural monopoly if consumers are heterogeneous and the monopolist can differentiate prices imperfectly. With restricted entry, the standard result in this case is that the monopoly offers a menu of price-quantity combinations which leads to the well-known 'no-distortion-at-the-top` pricing. Low demand consumers are induced to consume less than their first-best quantity, while high demand consumers buy a quantity where their marginal willingness to pay equals marginal cost. The paper shows that this type of inefficiency may also appear in a contestable market. Depending on cost and demand structures, first best efficiency can al so be a sustainable equilibrium. However, due to the existence of a continuum of equilibria, first best efficiency is never guaranteed. Most notably, even a stable 'distortion-at-the-top' result is possible.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 186

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Natural Monoply ; Contestability ; Contract Theory

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Weichenrieder, Alfons
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 1999

Weitere Informationen

• Handle: http://hdl.handle.net/10419/75658
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ