Table 2. The effects of price regulation in the form , i.e. the price is set 40% lower than the optimal monopolistic price.
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) |
h | P* | ||||||
0.10 | 0.97 | 0.0069 | 5.98 | 0.0581 | 24.38 | 8.37 | 56.71 |
0.20 | 0.93 | 0.0061 | 5.70 | 0.0534 | 23.73 | 8.79 | 57.16 |
0.30 | 0.88 | 0.0052 | 5.42 | 0.0484 | 23.04 | 9.25 | 57.64 |
0.40 | 0.82 | 0.0044 | 5.13 | 0.0430 | 22.31 | 9.78 | 58.10 |
0.50 | 0.75 | 0.0036 | 4.85 | 0.0372 | 21.54 | 10.37 | 58.60 |
0.60 | 0.66 | 0.0028 | 4.55 | 0.0310 | 20.71 | 11.05 | 59.09 |
0.70 | 0.55 | 0.0020 | 4.25 | 0.0242 | 19.84 | 11.84 | 59.57 |
0.80 | 0.41 | 0.0013 | 3.95 | 0.0169 | 18.90 | 12.75 | 60.08 |
0.90 | 0.24 | 0.0006 | 3.65 | 0.0088 | 17.91 | 13.83 | 60.59 |
In this case the decrease in revenues is 3%–6% (see column 4), much more substantial relative to the case shown in Table 1. While the increase in consumer surplus is also larger (6), the ratio between the consumer surplus increase and the revenue decrease is lower than in the case of (compare column (7) with column (7) in Table 1).