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Competition, prices and x-efficiency

by: Primeaux, Walter J; University of Illinois at Urbana-Champaign. College of Commerce and Business Administration

Publication date: 1978

Topics: Competition, Electric utilities

Publisher: [Urbana, Ill.] : College of Commerce and Business Administration, University of Illinois at Urbana-Champaign

Collection: university_of_illinois_urbana-champaign; americana

Contributor: University of Illinois Urbana-Champaign

Language: English

Volume: BEBR No. 521

Includes bibliographical references

"The purposes of this study were (1) to assess the magnitude of price effects whenever an electric utility firm faces DIRECT competition from another electric utility firm and (2) to observe these price-effects of competition compared with X-efficiency effects on costs."

"The results support the presence of lower prices with competition which accompany the elimination of X-efficiency, as hypothesized by Leibenstein. However, the results show that firms did not recoup all of the price concessions they granted because of competition. This suggests that firms were unable to generate sufficiently large cost economies to offset the price reductions caused by competitive pressure."