Fare Evasion and Monopoly Regulation

• Martín Besfamille ^[1] ; Nicolás Figueroa ^[2] ; León Guzmán ^[3]
  1. [1] Université de Toulouse

     Université de Toulouse

     Arrondissement de Toulouse, Francia

     
  2. [2] University of Minnesota System

     University of Minnesota System

     City of Minneapolis, Estados Unidos

     
  3. [3] New York University

     New York University

     Estados Unidos

     

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• Localización: Documentos de Trabajo ( Instituto de Economía PUC ), ISSN-e 0717-7593, Nº. 566, 2022
• Idioma: inglés
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• Resumen

  • We consider the regulation of a monopoly facing consumers that may evade payments, an important issue in public utilities. To maximize total surplus, the regulator sets the price and socially costly transfers, ensuring that the monopoly breaks-even. With costly effort, the firm can deter evasion. Under unit demand and fixed quality, price is independent of marginal cost, but increasing in the marginal cost of public funds. When quality is endogenous, we find sufficient conditions that imply a non-monotonic relation between price and marginal cost of public funds. We extend the model to consider non-unit demand and moral hazard.