07.Slides from California Price Cap Analysis (092810)

07.Slides from California Price Cap Analysis (092810) - Is...

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Issues for Price Cap Debate 1. The pricing behavior led to inefficiency – Hint: think productive vs. allocative 2. A cap could reduce inefficiency 3. A hard cap of p cap =$150 will work 1. The pricing behavior did not lead to (much) inefficiency (allocative vs. productive) 2. Hard cap of p cap =$150 poses risks 3. A better proposal than a hard cap is…. Pro Cap Against Cap
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D Tot MC 5 MC fringe Quantity Price Questions: What price does the “Big 5” choose if they act like a joint monopolist on residual demand? Is there any allocative inefficiency? Is there any productive inefficiency?
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P* Q 5 Q fringe MR 5 RD 5= D Tot -MC fringe D Tot MC 5 MC fringe Quantity Price Questions: What price does the “Big 5” choose if they act like a joint monopolist on residual demand? Is there any allocative inefficiency?
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Unformatted text preview: Is there any productive inefficiency? P* Q 5 Q fringe MR 5 RD 5= D Tot-MC fringe D Tot MC 5 MC fringe = MC of next plant that Big 5 can use = MC of last plant that fringe is using Quantity Price Questions: What price does the Big 5 choose if they act like a joint monopolist on residual demand? Is there any allocative inefficiency? Is there any productive inefficiency? P* Q 5 Q fringe MR 5 RD 5= D Tot-MC fringe D Tot MC 5 MC fringe = MC of next plant that Big 5 can use = MC of last plant that fringe is using Quantity Price Questions: What price does the Big 5 choose if they act like a joint monopolist on residual demand? Is there any allocative inefficiency? Is there any productive inefficiency? P cap...
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07.Slides from California Price Cap Analysis (092810) - Is...

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