Contrary to conventional wisdom, a regulated natural monopoly may be vulnerable to entry by uninnovative competitors even if it is producing and pricing efficiently and earning zero economic profits. The causes and consequences of this unsustainability are theoretically examined in an idealized...

The well-known result that optimal peak load pricing requires only users who utilize plant to capacity to bear any fraction of the capacity costs is shown to result from the technological assumption of the traditional literature and not from the fundamental nature of the peak load problem. When...

Willig demonstrated that in a model in which user demands are independent, a uniform price greater than marginal cost can be Pareto dominated by a nonlinear outlay schedule. However, when users are firms of different sizes which compete in final product markets, their demands must be...

This article considers two schemes of regulation for firms that serve both monopoly markets and markets subjected to substantial competition. The first form ("cost-based" regulation) combines elements of rate-of-return regulation (on monopoly markets) with fully distributed cost pricing, much...

This chapter discusses the cost concepts required for analyzing the role of technology in the determination of firm and industry structure. It focuses on the general multiproduct case, although important single product aspects of the problem are also discussed. An analysis of the role these cost...