Accessible Unlicensed Requires Authentication Published by De Gruyter July 21, 2016

Coasean Quality of Regulated Goods

Marian W. Moszoro

Abstract

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

Acknowledgment

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 Online: 2016-7-21
Published in Print: 2016-10-1

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