1. What are a regulated firm's incentives to act anticompetitively in competitive markets when its monopoly market is regulated using price caps? Does it have the same incentives as a firm subject to cost-based regulation? Explain. Can you think of how implementation of price-cap regulation might create incentives for anticompetitive behavior?
2. What can you infer about the nature of the telecommunications and natural gas transmission markets by the prevalence of price caps in the former and their dearth in the latter?