Abstract
Utilities in the USA are prohibited from charging prices that are unduly discriminatory, but the meaning of ‘undue’ is not clear. A review of recent court decisions reveals that regulators' decisions are rarely overturned for this reason. The economics literature suggests that any set of prices falling between marginal cost and the unregulated monopoly price may be acceptable, but this provides little guidance for defining ‘undue’ in practice. The antitrust offence of price discrimination concerns effects on competition in a vertical chain, suggesting a growing role for vertical pricing effects in regulatory proceedings.
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