Integration Effects of Firms Subject to Regulation
The standard model of the regulated firm assumes that the monopoly produces one homogeneous output with two inputs, capital and labor. However, many firms subject to regulatory constraint, particularly public utilities, produce a multitude of products, with related or unrelated demands. This paper explores the modifications required by the latter case in the standard Averch-Johnson model. The effects of mergers between regulated monopolies is also studied. It is shown that, in general, mergers lead to changes in the composition of outputs and the factors that determine the direction of these changes are analyzed. Finally, it is proved that the well-known result concerning the desirability of regulation can be extended, when demands are independent, to the many-good case.
Year of publication: |
1976
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Authors: | Peles, Yoram ; Sheshinski, Eytan |
Published in: |
Bell Journal of Economics. - The RAND Corporation, ISSN 0361-915X. - Vol. 7.1976, 1, p. 308-313
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Publisher: |
The RAND Corporation |
Saved in:
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