Paul W. MacAvoy

A sample of observations on comparative prices in public and private enterprises

Abstract Assuming imperfect competition and economy-wide welfare maximization, public enterprises should have lower profit margins and thus with comparable costs should have lower prices than private companies carrying on the same activity. Data from a sample of comparable Indonesian public and private enterprises show lower public enterprise profit margins, but they also show higher costs, so that public enterprise prices were not lower than private enterprise prices. An attempt is made to explain and generalize on these results.

The failure of antitrust and regulation to establish competition in long-distance telephone services

This text argues that governmental antitrust actions and regulatory activities have failed to bring true competition to long-distance telephone services in the USA, to the detriment of consumers seeking prices in line with the costs of providing those services. Although other long-distance telephone companies have emerged since the 1984 antitrust decree forced the monopoly AT&T to divide into smaller independent companies, the author shows how the three major long-distance telephone companies - AT&T, MCI and Sprint - have used the regulatory system to tacitly collude in setting prices and to bar entry into the market of potentially competitive alternative sources of services. The consequence, he claims, is an excessive cost to long-distance telephone customers conservatively estimated in the tens of millions of dollars.

The effectiveness of the Federal Power Commission

This paper takes the view that the Federal Power Commission dispenses services that have measurable economic benefits and imposes the costs of these services on both the regulated firms and the final consumers of gas and electricity. An attempt is made to define and measure benefits from regulation at the margin, where this margin has been chosen by the Commission via present rulemaking and surveillance activities. The costs of regulatory proceedings are estimated to include expenditures of the Federal Power Commission and other participants in the Commissions proceedings, and to include implied losses of final consumers consequent from regulatory delay. Benefits are compared to costs for each of the Commissions areas of responsibility, and the comparisons pose the question whether there ought to be more or less regulatory activity. The estimates here imply that the FPC is operating at a greater scale than net benefits warrant, particularly as a consequence of its ventures toward regulating natural gas production in the last decade.

Relative Prices on Regulated Transactions of the Natural Gas Pipelines

As in many regulated industries, jurisdiction of the commission regulating the natural gas pipelines does not encompass all transactions of the regulated companies. The Federal Power Commission does not regulate direct sales of the pipelines to industry, while it does set profit limits on sales to retail gas utilities companies. If regulation is effective, the prices on the regulated sales should be different from those on the unregulated industrial transactions, all else being equal. A model is constructed here of the behavior of the firm with split regulated-unregulated sales. Thenceforth, the model is tested against a sample of paired transactions. Thenceforth, the model is tested against a sample of paired transactions in the late 1960s. The findings are that price levels on regulated sales would not appear to have been different from those on unregulated sales, after account has been taken of cost and demand differences. The effects of regulation, while in the expected direction, were insubstantial. Moreover, the differences in the institution of price setting under regulation -- in particular, the widespread use of two-part tariffs -- if anything, enhanced the ability of the pipelines to charge identical regulated and unregulated prices.

The new long-term trend in the price of natural gas

A significant negative trend in the long-term price of natural gas at the wellhead is revealed from simulations with a partial equilibrium model of the industry in the United States. The model framework consists of a simultaneous equations system for production from reserves and for demands for production in the residential, commercial and industrial sectors. We utilize a wide range of historical data to calibrate the model and then develop two sets of scenarios for future prices, one based on further industry development under current regulation, and the other based on deregulation and development of an open market for gas services. The key variables---price of natural gas, level of production and inground gas reserves---for the next 10 years improve for the consumer whether or not there is deregulation but the second scenario leaves the consumer better off sooner.

Price formation in natural gas fields : a study of competition, monopsony, and regulation

This study concentrates on the economic reasons for regulation, stating the characteristics of price formation--monoploy price formation and competitive and monopsony price formation--in order to see which corresponds most closely to actul price formation.

The Performance and Management of United States Federal Government Corporations

The Federal Government’s production of goods and services has come under increased scrutiny in recent years, as regulatory reform and constraints on federal budget expenditures have begun to take hold in the far corners of government. Although there is less public enterprise in the United States than in the United Kingdom or Canada, the scale and scope of operations of the Federal companies are still considerable. Their size and strategic importance make the case for an evaluation of the public nature of their operations. Where poor results follow because the government is the producer, then reform policy should center on divestiture of these federal organizations.

The Arithmetic of Shale Gas

Academic and professional assessments of shale gas (also known as frac gas) from vast shale formations in the US have focused on the social costs of shale gas development. Using the economic tools of traditional cost benefit analysis, we demonstrate that for one given year, 2010, the consumer surplus from shale gas is in excess of

Conserving energy in the production of aluminum

100 billion to the US economy. The benefit to the US economy of replacing 1.0 million bbls per day of oil consumption with the BTU equivalent of natural gas is in excess of

The causes and effects of deregulation

25 billion.