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Spatial price homogeneity as a mechanism to reduce the threat of regulatory intervention in locally monopolistic sectors

Abstract : We claim that a reason for why unregulated investor-owned local monopolies do not always charge the monopoly price is that they are threatened by customer complaints that may lead to retaliations from local elected officials. When investor-owned monopolies are exposed to this threat they will mimic the price(s) of their neighbour(s); the stronger the threat, the higher the spatial price correlation. The threat increases when elected officials have pro-consumer preferences and neighbours are geographically close. The empirical analysis, based on a complete cross-sectional data set from the Swedish district heating sector in 2007, confirms the theoretical predictions.
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https://hal-mines-paristech.archives-ouvertes.fr/hal-00659458
Contributor : Yann Ménière <>
Submitted on : Thursday, January 12, 2012 - 5:59:10 PM
Last modification on : Friday, April 16, 2021 - 12:40:03 PM
Long-term archiving on: : Friday, April 13, 2012 - 2:35:55 AM

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  • HAL Id : hal-00659458, version 1

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Magnus Söderberg, Makoto Tanaka. Spatial price homogeneity as a mechanism to reduce the threat of regulatory intervention in locally monopolistic sectors. 2012. ⟨hal-00659458⟩

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