To read this content please select one of the options below:

THEORETICAL MODELS OF RATE REGULATION: A SURVEY AND CRITIQUE

DAVID MCNICOL (The United States Department of the Treasury)
ALMARIN PHILLIPS (Professor of Economics and Law, University of Pennsylvania)

Studies in Economics and Finance

ISSN: 1086-7376

Article publication date: 1 January 1978

91

Abstract

INTRODUCTION During the past dozen years a relatively large theoretical literature has grown out of the models proposed by Averch‐Johnson (2) and, to a lesser extent, Wellisz (90). Averch‐Johnson (here‐after A‐J) pointed out the now famous overcapitalization effect‐that a monopoly subject to rate of return regulation has an incentive to use more than the cost minimizing value of capital. The A‐J model was at first regarded as simply a theoretical explanation of what was long thought to be a significant cost of regulation. After languishing in this state for several years, the model achieved some popularity as a vehicle for theoretical explorations of various aspects of rate regulation. To date, the A‐J model has given rise to nearly forty papers on what has come to be called “the theory of regulatory constraint.”

Citation

MCNICOL, D. and PHILLIPS, A. (1978), "THEORETICAL MODELS OF RATE REGULATION: A SURVEY AND CRITIQUE", Studies in Economics and Finance, Vol. 2 No. 1, pp. 3-70. https://doi.org/10.1108/eb028595

Publisher

:

MCB UP Ltd

Copyright © 1978, MCB UP Limited

Related articles