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Next: Result 4: Market Intervention Up: Summary and Discussion of Previous: Result 2: Trigger Prices

Result 3: The Higher Cost Firm May Earn No Profit

There is an exception in the results that are reported in Table 4. In service area F, the firm with the higher costs was unable to earn a profit when the costs of the second firm was made greater than the cost of the first firm by a ratio of 1.57. So, for service area F only, we report on results of firm interaction where the costs of both firms are equal at the Provider0 level. Provider1 could have earned a profit if the costs of the two firms were made different by a ratio of 1.13, but not greater. Note that service area F has the smallest number of households. We also see in Table 4, the total discounted values for both providers are larger in areas with greater numbers of households.


Judith Molka-Danielsen
Wed Sep 10 14:34:53 CEST 1997