The pricing in monopolistic sector using international price benchmarking method

Autor: Inga Maksvytienė, Mindaugas Dapkus
Jazyk: litevština
Rok vydání: 2014
Předmět:
Zdroj: Taikomoji ekonomika : sisteminiai tyrimai, ISSN 1822-7996, 2014, T. 8, nr. 1, p. 51-65
Taikomoji ekonomika: sisteminiai tyrimai [Applied economics: systematic research]. 2014, t. 8, Nr. 1, p. 51-65.
ISSN: 1822-7996
2335-8742
Popis: One of the methods of monopolies’ regulation is the price regulation. It comprises the price cap, the profit rate determination, control of production cost. The biggest problem of all regulators is the lack of information, which creates an agency dilemma. Monopolies’ operators keep the power over technologies’ knowledge and so over the technological cost. That’s why last mentioned price regulation methods, based on operators costs, integrate inefficiency’s root. This deficiency could be diminished by Price Benchmarking Method , which states about need of the orientation on the best practices effectuating monopolistic activity; so the pressure on monopolistic operator could be exercised through the price setting on the level of leading companies’ price (and especially on leading international companies’ price). In such way established prices for particular operator are economically based and so can be used to stimulate monopolists to improve their activity ignoring operators’ internal cost development (so bypassing the agency problem). Especially this method is useful for less developed countries, where the practice of price setting on the base of cost is habitual, and where the monopolistic pressure on society is big. In proposed research is treated the problem of efficient price setting using international price benchmarking method. The purpose of the study was to propose the method for benchmarking based price setting in Lithuanian monopolistic water supply sector and demonstrate its applicability. The proposed price benchmark method is based on the households’ water expenses evaluation according purchasing power parity in some comparable countries. This evaluation, however, was corrected according specific situation of countries, which could influence on the costs of production: the factors involved in model are infrastructure’s construction cost differences, market density, taxes’ gap. As benchmarking countries were selected Netherlands, Denmark and Germany. The model of monopolistic price P establishment for the period t+1 is described as: Where, – initial Lithuanian monopolists relative price level regarding benchmarking countries, T – overall monopolistic sector reformation period (here 30 years), E – household’s yearly expenses for drink water, S – yearly salary, Q – early quantity of consumed drink water, a – share of fixed costs in revenues of drink water suppliers, D – density of population for one km of pipelines’ network, C – infrastructure’s construction costs, and T Xt – taxes in compared countries B (benchmarking countries Denmark, Netherlands), G (Germany) and Lt (Lithuania). Application of proposed method have revealed that Lithuania’s drinking water supply sector’s prices are over evaluated by about 40 % () and that means the need to yearly diminishing of relative tariffs by 1,33 % (), other factors being constant. According to International Price Benchmarking Model established prices for monopolistic operators depends on external factors (construction costs outside Lithuania, market density and taxes), which cannot be directly influenced by the operator himself and so the monopolies’ regulators don’t need to care about agency problem.
Databáze: OpenAIRE
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