Incumbent and entrant response to regulated competition: Signalling with accounting costs and market prices

Jesús Otero, Catherine Waddams Price

Research output: Contribution to journalArticlepeer-review

Abstract

Relative prices charged by incumbents have become a strategic issue as competition is introduced into regulated markets which were previously served by a monopoly supplier. We report on the behavior of the incumbent and entrants in the residential UK gas market, where the regulator has made several investigations into whether the incumbent’s relative prices constitute undue discrimination. We identify the regulator’s policy, the strategic use of cost allocation by both the regulator and the incumbent, and the costs implied by entrants’ prices. We deduce that the entrants’ behavior provides support for the incumbent’s cost allocation arguments rather than those of the regulator.
Original languageEnglish (US)
Pages (from-to)209 - 223
Number of pages15
JournalJournal of Economics and Business
Volume53
Issue number2-3
DOIs
StatePublished - 2001

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