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(while stays the same). Therefore, the specific
price point chosen depends on whether the regulator places a higher weight on consumers or producers. To underscore
this point we can write social welfare as:
( ) Here
is the weight that the regulator places on consumer welfare. Suppose that
this case the regulated price and output are the same as the monopoly price and output: so that : in Regulated Monopolist
Monopolist Demand Demand ⏟ ⏟ 64
ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. On the other hand, suppose that
and unregulated outputs are the same: : in this case the regulated price equals while the regulated Regulated Monopolist
Monopolist Demand Demand ⏟ ⏟ Notice that: In most textbooks, you’ll see this case when the regulator favors consumers over producers so that: 65
ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-...
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This document was uploaded on 01/19/2014.
- Fall '14
- The Land