A Research On Monopoly Price Regulation With Contest Theory

During the transformation from planned economy to market economy, there exists monopoly problem in market-oriented reforms which have made tremendous achievements in industries such as telecommunication, electric power market, et al. The efficiency and welfare loss of monopoly is extremely concerned by many economists. Unfortunately, regulation theory seeking for an optimal policy to correct the distortion of monopoly ignores the interaction among interest groups and government. Therefore, it is significant to consummate the regulation theory and supervise the regulation practice by studying the interaction behavior and its roles toward regulation policy in price regulation policy. The analysis of the government constituting the optimal price regulation policy can help us to understand the meaning of regulating monopoly.The thesis constructs a contest model of monopoly price regulation applying contest theory, and studies the vying behavior in price regulation. It explores the contest equilibrium and presents the effect of regulation pricing upon interest groups'equilibrium efforts and possibility of winning the prize.At first, the thesis summarizes the contest theory such as its objects and elements, general benchmark model and contest success function identity. Then it explores the criterion equilibrium analysis of general benchmark contest model. Afterward, it comments monopoly pricing including the efficiency and welfare loses of monopoly, and shows the effect of regulation pricing on monopoly behavior. By constructing monopoly price regulation contest model, the thesis studies the contest behavior and its equilibrium, and identifies the effect of regulation pricing toward the equilibrium efforts and optimal possibility of winning the prize. It also considers the optimal regulation price when the society achieves long term equilibrium. An example of monopoly price regulation contest with linear demand function containing numeral analysis is shown, which analyzes the role of regulation pricing to monopoly from the perspective of efficiency and social welfare.At the end of the thesis, it raises issues which should be further studied.