Ignoring Spillover Effects of Airport Regulation.
Theoretical standard models and regulatory actions often ignore that firms are competing with other firms in related markets. In these contexts, cross-price relationships should be taken into account. The usual instinct with muitiproduct firms would be to use Ramsey prices to find optimal markups. H...
| Published in: | Journal of Transport Economics & Policy Vol. 47; no. 3; pp. 387 - 398 |
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| Main Authors: | , |
| Format: | Article |
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Liverpool University Press / Journals
Sep2013
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| Subjects: | |
| Online Access: | View this record in EBSCOhost |
| Summary: | Theoretical standard models and regulatory actions often ignore that firms are competing with other firms in related markets. In these contexts, cross-price relationships should be taken into account. The usual instinct with muitiproduct firms would be to use Ramsey prices to find optimal markups. However, this is only applicable in situations with independent demand functions. Literature mostly covers cases where the regulated firm is a natural monopoly and therefore faces a budget constraint. This paper aims to provide conditions under which optimal price caps are set whenever there are related markets and the regulated firm is not a natural monopoly. |
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