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Title:Informal benchmarks as a source of regulatory threat in unregulated utility sectors PDF Logo
Authors:Söderberg, Magnus
Issue Date:2010
Series/Report no.:CESifo working paper 2973
Abstract:This paper investigates to what extent unregulated local monopolies attempt not to evoke the introduction of a formal price regulation by conforming to customers' and authorities' expectations. It is argued that utilities can meet expectations by setting prices that imitate neighbours' prices. The empirical evaluation rests on a cross-sectional data set representing all Swedish district heating utilities, and on a flexible nonlinear IV specification. It is found that while utilities' price setting schemes are insensitive to customer complaints, they are significantly influenced by the passive monitoring by authorities. The spillover effect from the 5-6 closest neighbours is around 40 %.
Subjects:regulatory threat
spatial correlation
price
district heating
Sweden
JEL:L11
L33
L97
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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