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The Rate-of-Return Regulated Firm: Cost and Production Duality

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  • Rolf Fare
  • James Logan

Abstract

A duality between cost and production is established for a firm subject to rate-of-return regulation. To this end, a rate-of-return regulated production function is defined and shown to exist. It is then shown how information regarding the unregulated technology can be obtained from the rate-of-return regulated cost function. With knowledge of the rate-of-return constraint, the rate-of-return regulated production function can be reconstructed.

Suggested Citation

  • Rolf Fare & James Logan, 1983. "The Rate-of-Return Regulated Firm: Cost and Production Duality," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 405-414, Autumn.
    • Handle: RePEc:rje:bellje:v:14:y:1983:i:autumn:p:405-414
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    Cited by:

    1. Gerald Granderson & Diego Prior, 2013. "Environmental externalities and regulation constrained cost productivity growth in the US electric utility industry," Journal of Productivity Analysis, Springer, vol. 39(3), pages 243-257, June.
    2. Robert A. Mcguire & Robert Ohsfeldt, 1986. "Public versus Private Water Delivery: A Critical Analysis of a Hedonic Cost Approach," Public Finance Review, , vol. 14(3), pages 339-350, July.
    3. Kenneth Løvold Rødseth, 2017. "Environmental regulations and allocative efficiency: application to coal-to-gas substitution in the U.S. electricity sector," Journal of Productivity Analysis, Springer, vol. 47(2), pages 129-142, April.
    4. Baffoe-Bonnie, John, 2004. "Learning-by-doing and input demand of a rate-of-return regulated firm," Economic Modelling, Elsevier, vol. 21(6), pages 1015-1037, December.
    5. Gerald Granderson, 2000. "Regulation, Open-Access Transportation, and Productive Efficiency," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 16(3), pages 251-266, May.
    6. Gerald Granderson & Carl Linvill, 1999. "Parametric and Nonparametric Approaches to Benchmarking the Regulated Firm," Journal of Productivity Analysis, Springer, vol. 12(3), pages 211-231, November.
    7. Krouse, Clement G & Cabolis, Christos & Danger, Kenneth L & Carter, Tanja D & Riddle, Jon M & Ryan, Daniel J, 1999. "The Bell System Divestiture/Deregulation and the Efficiency of the Operating Companies," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 61-87, April.
    8. Gerald Granderson & Finn Forsund, 2014. "Rate of return regulation and the Le Chatelier principle," Journal of Productivity Analysis, Springer, vol. 41(2), pages 263-275, April.

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