Regulation and Cost Inefficiency

Regulation and Cost Inefficiency The well known Averch Johnson effect states thatrate-of-return regulation will induce costinefficient production. This paper examinesregulation induced inefficiency in broad set ofenvironments including arbitrary regulatorymechanisms, multiple outputs/inputs, uncertainty,time dynamics, price discrimination, and more. Ishow that the Averch Johnson effect appliesthroughout a wide variety of settings. Despite thegenerality of framework, my analysis is trulyelementary and does not rely on Kuhn–Tucker analysisor three dimensional graphics. I also provideresults and discussion which clarifies the limits toAverch and Johnson-like insights in practicalapplications. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Regulation and Cost Inefficiency

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2001 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1007823231402
Publisher site
See Article on Publisher Site

Abstract

The well known Averch Johnson effect states thatrate-of-return regulation will induce costinefficient production. This paper examinesregulation induced inefficiency in broad set ofenvironments including arbitrary regulatorymechanisms, multiple outputs/inputs, uncertainty,time dynamics, price discrimination, and more. Ishow that the Averch Johnson effect appliesthroughout a wide variety of settings. Despite thegenerality of framework, my analysis is trulyelementary and does not rely on Kuhn–Tucker analysisor three dimensional graphics. I also provideresults and discussion which clarifies the limits toAverch and Johnson-like insights in practicalapplications.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 3, 2004

References

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