Static, partial equilibrium, rate of return based rates models of the regulation of natural monopolies: a revision of the conventional Averch and Johnson analysis

Thesis/Dissertation · Tue Jan 01 04:00:00 EST 1985

OSTI ID:5552979

Langin-Hooper, J J

This thesis examines an alternative static, partial equilibrium model that appears to offer substantial advantages over the Averch and Johnson model. A major failing of the Averch and Johnson method is its inadequate treatment of the price setting function of the regulatory agency. Another major difficulty with the Averch and Johnson approach is in its application to situations of inelastic market demand with respect to price, a condition associated with many rate-of-return regulated industries. This thesis presents an alternative approach to the analysis of rate-of-return regulation. In the model the regulator sets price to the lowest possible level which generates a fair return to the firm's capital by evaluating the firm's costs and demand conditions and binding the joint quantity and price levels which satisfy the production, cost, and rate-of-return requirements. The primary conclusion of the thesis is that in the rate-of-return based rates model, the firm will choose an input factor combination that minimizes its costs of production.

• Research Organization: Rutgers--the State Univ., New Brunswick, NJ (USA)
• OSTI ID: 5552979
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
293000* -- Energy Planning & Policy-- Policy
Legislation
& Regulation
296000 -- Energy Planning & Policy-- Electric Power
COST
MATHEMATICAL MODELS
MONOPOLIES
PRICES
PRICING REGULATIONS
PRODUCTION
PUBLIC UTILITIES
RATE STRUCTURE
REGULATIONS