An outlay schedule gives the expenditures required of consumers for the purchase of different quantities of a good or service. For any uniform price unequal to marginal cost, there is a nonlinear outlay schedule that is preferred by each consumer and that yields greater vendor profit. In fact,...

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 price-iso return locus for a regulated multiproduct firm shows all price vectors giving the rate of return permitted by regulation. The locus for any two products is shown to have both negatively and positively sloping segments. A price vector on a positively sloped segment is socially...

This article reviews the substance of the literature stemming from the Averch-Johnson model of the firm under rate-of-return regulation. It examines a number of propositions, among them the following: (1) The profit-maximizing firm under rate-of-return regulation will tend to use a capital-labor...

Depreciation policy is analyzed from the point of view of optimal inter-temporal resource allocation. Because depreciation determines the time pattern of prices of the product of an asset it affects the timing of demands. Models extended from peak-load pricing theory are used to determine rules...

Amtrak has recently arrived at a new contract with a number of its supplying railroads representing over 50 percent of its passenger service. The new contract represents a major regulatory innovation in which payments to the railroads are based on quality of service, according to a fixed...