REGULATION, COMPETITION, AND THE STRUCTURE OF PRICES

Many competition policy issues in regulated industries concern the str ucture of prices charged by multi-product firms--for example price dis crimination, non-linear pricing, cross-subsidies, and network access p ricing. This article first sets out the (Ramsey) principles of optimal pricing to recover fixed costs. The sometimes conflicting aims of pro moting competition and pursuing social objectives are brought into the analysis. Questions of whether to allow pricing structure discretion to the firm, and how much, are considered next. With asymmetric inform ation, some discretion is often desirable, but its optimal form is har d to characterize. The article then turns to the controversial network access pricing problem -- and what terms should an integrated dominan t firm be required to supply inputs required by its rivals? Finally, t here is discussion of pricing structure regulation in the transition f rom more to less regulation, which, it is to be hoped, is in prospect in parts of the regulated industries as effective competition develops .