Suppose a regulator oversees the pricing practices of a monopolist who sells an identical good in more
than one market.
(a) Why would the regulator be concerned about the ability of consumers to resell the good?
(b) If a regulator’s only power is the ability to make the monopolist charge the same price across all
markets, why might the regulator choose to impose a uniform price? [The alternative is to allow the
monopolist to choose different prices in the different markets.]
(c) If the regulator’s powers are enhanced so the regulator can now set separate prices in each market,
why would the regulator prefer to set different prices in each market rather than setting a uniform price
across all markets?
Now consider an upstream monopolistic manufacturer who agrees a deal with a downstream monopolist
retailer that stipulates a variety of restrictions on the retailer.
(d) What impact is this vertical restraint likely to have on the price charged to consumers?
(e) What impact is this vertical restraint likely to have on service provisions for the consumers?
(f) What additional regulatory concerns arise if the manufacturer has similar constraints with other
retailers in competing markets?
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