Partial Regulation of Natural Monopoly

  • John Tschirhart
Part of the Topics in Regulatory Economics and Policy Series book series (TREP, volume 4)

Abstract

A substantial body of economic research over the past decade or so has been directed at the regulation of natural monopolies. Indeed the very definition of natural monopoly has been updated. Baumol (1977) equated natural monopoly with a firm whose cost function is subadditive over the relevant region of production. He then developed cost concepts for multi-product firms that allow a better understanding of the conditions that give rise to natural monopoly. Panzar and Willig (1977) studied the sustainability of a firm; that is, can a firm charge prices for its outputs that will thwart competitive entry. And Baumol, Panzar and Willig (1982) introduced contestability, a measure of the ease with which new firms can enter an industry. The work of these authors and others has led to a reevaluation of the market and technological conditions that justify when a natural monopoly should or should not be regulated.2

Keywords

Undercut Plague Monopoly Baumol 

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References

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Copyright information

© Kluwer Academic Publishers 1989

Authors and Affiliations

  • John Tschirhart

There are no affiliations available

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