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The Logic of Natural Monopoly Regulation

Author

Listed:
  • Robert D. Tollison

    (George Mason University)

  • Richard E. Wagner

    (George Mason University)

Abstract

The authors explain why the elementary logic of rate-of-return regulation generates not the competitive outcome but the monopoly outcome. Within the framework of the "passive regulator" that this logic entails, public regulation cannot alter the monopoly outcome, but can only change the form in which the monopoly rent is captured. The authors also explain why it is essentially no different even if the regulator is an "active regulator," who does not passively allow as costs all that the monopolist declares to be costs.

Suggested Citation

  • Robert D. Tollison & Richard E. Wagner, 1991. "The Logic of Natural Monopoly Regulation," Eastern Economic Journal, Eastern Economic Association, vol. 17(4), pages 483-490, Oct-Dec.
    • Handle: RePEc:eej:eeconj:v:17:y:1991:i:4:p:483-490
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume17/V17N4P483_490.pdf
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    Citations

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    Cited by:

    1. Kevin Currier, 2004. "Natural monopoly regulation in the presence of cost misreporting," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 32(1), pages 49-61, March.

    More about this item

    Keywords

    Monopoly; Regulation;

    JEL classification:

    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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