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Coasean Quality of Regulated Goods

Marian W. Moszoro


The quality of goods provided by public utilities depends on infrastructure features and operational inputs. I compare the economic efficiency that results from price ceilings and minimum quality standards (i. e., compliance with environmental, chemical, and performance standards and norms) imposed by a benevolent regulator to a Coasean bargaining solution between a median consumer and a monopolist. When quality is non-excludable and non-rival, rate-of-return regulation yields higher economic efficiency than price cap regulation.

JEL Classification: H41; H54; L15; L43; L51


I am grateful to Emmanuelle Auriol and to three anonymous referees whose many suggestions led to a significant revision of this paper.


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Published in Print: 2016-10-1

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