VOTING, SPATIAL MONOPOLY, and SPATIAL PRICE REGULATION

Regulations often require that local public utilities engage in high rates of freight absorption. These regulations, often mandating uniform pricing, are shown to arise logically as a consequence of self-interested voting behavior. We specifically consider the case of a single-plant spatial monopoly which is regulated by consumers distributed around the plant. Consumers may change their delivered price by voting to require a rate of freight absorption which differs from the profit-maximizing rate. Voting outcomes under a median voter model predict the high rate of freight absorption often observed in practice.