We examine the impact of price cap regulation on the capacity investments of oligopolistic suppliers facing time-varying demand. We find that binding price caps set above long-run marginal cost increase (rather than decrease) aggregate capacity investment.

This note analyzes a simple Cournot model where firms choose outputs and capacities facing varying demand and price-cap regulation. We find that binding price caps set above long-run marginal cost increase (rather than decrease) aggregate capacity investment.

This note analyzes a simple Cournot model where firms choose outputs and capacities facing varying demand and price-cap regulation. We find that binding price caps set above long-run marginal cost increase (rather than decrease) aggregate capacity investment