The Pricing Dynamics of Utilities with Underdeveloped Networks

Chisari, Omar O. ; Kessides, Ioannis N.

World Bank, Washington, DC

关键词: BENCHMARK;    BENCHMARK LEVEL;    BENCHMARKS;    COMPETITIVE FRINGE;    CONNECTIONS;   

DOI  :  10.1596/1813-9450-4198
RP-ID  :  WPS4198

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

This paper uses an analyticallytractable intertemporal framework for analyzing the dynamicpricing of a utility with an underdeveloped network (atypical case in most developing countries) facing acompetitive fringe, short-run network adjustment costs,theft of service, and the threat of a retaliatory regulatoryreview that is increasing with the price it charges. Thissimple dynamic optimization model yields a number ofpowerful policy insights and conclusions. Under a variety ofplausible assumptions (in the context of developingcountries) the utility will find its long-run profitsenhanced if it exercises restraint in the early stages ofnetwork development by holding price below the limit definedby the unit costs of the fringe. The utility's optimalprice gradually converges toward the limit price as itsnetwork expands. Moreover, when the utility is threatenedwith retaliatory regulatory intervention, it will generallyhave incentives to restrain its pricing behavior. Thesefindings have important implications for the design ofpost-privatization regulatory governance in developing countries.