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Regulation of price increases

Publication ,  Journal Article
Ridley, DB; Zhang, S
Published in: International Journal of Industrial Organization
January 1, 2017

U.S. federal and state governments rarely regulate healthcare price levels, but do regulate price changes for pharmaceuticals, hospitals, and health insurance. Previous research showed that limiting price increases can raise launch prices and reduce both profit and social welfare, assuming consumers are myopic. We show that with forward-looking consumers, limiting price increases can have the opposite effect, that is, launch prices fall while profit and social welfare rise. Ironically, inflation regulation can cause inflation to rise, but only because firms are reducing launch prices to make the regulation bind and credibly commit to future prices.

Duke Scholars

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Published In

International Journal of Industrial Organization

DOI

ISSN

0167-7187

Publication Date

January 1, 2017

Volume

50

Start / End Page

186 / 213

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3801 Applied economics
  • 3507 Strategy, management and organisational behaviour
  • 1403 Econometrics
  • 1402 Applied Economics
  • 1401 Economic Theory
 

Citation

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Ridley, D. B., & Zhang, S. (2017). Regulation of price increases. International Journal of Industrial Organization, 50, 186–213. https://doi.org/10.1016/j.ijindorg.2016.11.004
Ridley, D. B., and S. Zhang. “Regulation of price increases.” International Journal of Industrial Organization 50 (January 1, 2017): 186–213. https://doi.org/10.1016/j.ijindorg.2016.11.004.
Ridley DB, Zhang S. Regulation of price increases. International Journal of Industrial Organization. 2017 Jan 1;50:186–213.
Ridley, D. B., and S. Zhang. “Regulation of price increases.” International Journal of Industrial Organization, vol. 50, Jan. 2017, pp. 186–213. Scopus, doi:10.1016/j.ijindorg.2016.11.004.
Ridley DB, Zhang S. Regulation of price increases. International Journal of Industrial Organization. 2017 Jan 1;50:186–213.
Journal cover image

Published In

International Journal of Industrial Organization

DOI

ISSN

0167-7187

Publication Date

January 1, 2017

Volume

50

Start / End Page

186 / 213

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3801 Applied economics
  • 3507 Strategy, management and organisational behaviour
  • 1403 Econometrics
  • 1402 Applied Economics
  • 1401 Economic Theory