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The "Optimal" Fair Rate of Return

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  • Alvin K. Klevorick

Abstract

A rather extensive literature has developed that analyzes the behavior of the profit-maximizing regulated firm using the model introduced by H. Averch and L.L. Johnson (A-J). Taking the value of the fair rate of return as exogenously given, this set of papers has provided a rather complete and detailed analysis of the (absolute and relative) input levels chosen by such a regulated firm and the quantity of output produced by the company.

Suggested Citation

  • Alvin K. Klevorick, 1971. "The "Optimal" Fair Rate of Return," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 122-153, Spring.
    • Handle: RePEc:rje:bellje:v:2:y:1971:i:spring:p:122-153
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    Cited by:

    1. Paul L. Joskow, 2014. "Incentive Regulation in Theory and Practice: Electricity Distribution and Transmission Networks," NBER Chapters, in: Economic Regulation and Its Reform: What Have We Learned?, pages 291-344, National Bureau of Economic Research, Inc.
    2. Christoph Engel & Klaus Heine, 2017. "The dark side of price cap regulation: a laboratory experiment," Public Choice, Springer, vol. 173(1), pages 217-240, October.
    3. Perrotton, Florian & Massol, Olivier, 2018. "The technology and cost structure of a natural gas pipeline: Insights for costs and rate-of-return regulation," Utilities Policy, Elsevier, vol. 53(C), pages 32-37.
    4. Mirucki, Jean, 1980. "Vérification des conditions d'efficacité dans la production chez Bell Canada [Checking the conditions of efficient production in Bell Canada]," MPRA Paper 30147, University Library of Munich, Germany, revised Jun 1980.
    5. Paul L. Joskow & Roger G. Noll, 1981. "Regulation in Theory and Practice: An Overview," NBER Chapters, in: Studies in Public Regulation, pages 1-78, National Bureau of Economic Research, Inc.
    6. Mirucki, Jean, 1980. "Comportement de l'entreprise réglementée: étude de l'hypothèse Averch-Johnson [Behavior of the Regulated Firm: A Study of the Averch-Johnson Hypothesis]," MPRA Paper 27669, University Library of Munich, Germany, revised 1982.
    7. Oliver, Matthew E., 2019. "Pricing flexibility under rate-of-return regulation: Effects on network infrastructure investment," Economic Modelling, Elsevier, vol. 78(C), pages 150-161.

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