Behavior of the Firm Under Regulatory Constraint¶
Averch, H., & Johnson, L. L. (1962). Behavior of the Firm Under Regulatory Constraint. American Economic Review, 52(5), 1052-1069.
Cited by¶
1 citation across 1 artifact.
Each citation links to the sentence it supports in the citing article.
Mechanisms¶
- Price-Cap or Rate Review
- Rate-of-return review can induce the controller to pad its capital base, since a bigger rate base means bigger allowed profit — the Averch–Johnson tendency to gold-plate.
This sourceDerives the Averch–Johnson incentive for a rate-of-return-regulated firm to employ an inefficiently large capital base.
- Rate-of-return review can induce the controller to pad its capital base, since a bigger rate base means bigger allowed profit — the Averch–Johnson tendency to gold-plate.
Verification¶
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Registry ID ref:ce4ac1bc7c48 · see in the full table