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Free entry and the sustainability of natural monopoly
John C. Panzar,Robert D. Willig +1 more
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In this article, the causes and consequences of such unsustainability are theoretically examined in an idealized regulatory environment, showing that strong demand substitution effects and product-specific scale economies work against sustainability, and no regulated market structure which provides the entire product set can be sustainable.Abstract:
Contrary to conventional wisdom, a regulated natural monopoly may be vulnerable to entry by uninnovative competitors even if it is producing and pricing efficiently and earning zero economic profits. The causes and consequences of this unsustainability are theoretically examined in an idealized regulatory environment. In particular, strong demand substitution effects and product-specific scale economies work against sustainability. If natural monopoly is unsustainable, no regulated market structure which provides the entire product set can be sustainable.read more
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The theory and practice of corporate finance: Evidence from the field
TL;DR: The authors survey 392 CFOs about the cost of capital, capital budgeting, and capital structure and find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes.
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Contestable markets: an uprising in the theory of industry structure
TL;DR: A transcript of the presidential address delivered at the 94th Meeting of the American Economic Association on December 29, 1981 can be found in this article, where the authors discuss developments in the theory of industry structure; welfare attributes of contestable markets behavior; Characteristics of oligopoly equilibrium; Intertemporal vulnerability to inefficient entry.
Journal ArticleDOI
The Theory and Practice of Corporate Finance: Evidence from the Field
TL;DR: The authors survey 392 CFOs about the cost of capital, capital budgeting, and capital structure and find some support for the pecking-order and trade-off capital structure hypotheses but little evidence that executives are concerned about asset substitution, asymmetric information, transactions costs, free cash flows, or personal taxes.
Journal ArticleDOI
Capital Structure Policies in Europe: Survey Evidence
TL;DR: In this paper, the authors present the results of an international survey among 313 CFOs on capital structure choice and find remarkably low disparities across countries, despite the presence of significant institutional differences.
Journal ArticleDOI
A regulatory adjustment process for optimal pricing by multiproduct monopoly firms
Ingo Vogelsang,Jörg Finsinger +1 more
TL;DR: In this paper, an incentive mechanism that is shown to enforce the use of Ramsey prices by multiproduct monopolies is described, which limits information requirements on the regulatory agency to bookkeeping data of the firm.
References
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Journal ArticleDOI
Cores of Convex Games
TL;DR: In this article, it was shown that the core of a convex game is not empty and that it has an especially regular structure, and that certain other cooperative solution concepts are related in a simple way to the core.
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Behavior of the firm under regulatory constraint
TL;DR: In this paper, the authors discuss several of Takayama's criticisms in addition to showing that the so-called "A-J Effect" cannot be derived from the basic assumptions made by both Averch and Johnson and also present a new formulation which leads to the A-J result quoted above.
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Behavior of the Firm Under Regulatory Constraint
TL;DR: Averch and Johnson as mentioned in this paper argued that the introduction of an "active" constraint of a fair rate of return type would induce the firm to invest more than the original profit maximizing value of capital, and this would create an inefficient allocation of inputs.
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Economies of Scale in Multi-Output Production
John C. Panzar,Robert D. Willig +1 more
TL;DR: In this paper, it was shown that the existence of scale economies is not a sufficient condition for the unprofitability of marginal cost pricing, and that with more than one output this is neither necessary nor sufficient for monopoly to be the least cost production mode.
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Cross-subsidization: pricing in public enterprise
TL;DR: In this paper, the issues of cross-subsidization in public enterprises with economies of joint production are analyzed, and the relation of welfare maximizing prices to subsidy-free prices is discussed.