THE AVERCH-JOHNSON HYPOTHESIS AFTER TEN YEARS

Examines the argument that industries which are regulated to a specific "fair" rate of return tend to acquire a capital-labour ratio in excess of the level which minimises cost at the level of output selected by the firm, and that the firm may have an incentive to enter competitive markets even if revenue falls below incremental cost, since the difference may be more than compensated for by increased net revenue permitted through price increases in its monopoly services.

  • Supplemental Notes:
    • Published in W.G. Shepard, ed., "Regulation in Further Perspective: The Little Engine That Might."
  • Corporate Authors:

    Ballinger Publishing Company

    17 Dunster Street, Harvard Square
    Cambridge, MA  USA  02138
  • Authors:
    • Johnson, L L
  • Publication Date: 1974

Subject/Index Terms

Filing Info

  • Accession Number: 00148483
  • Record Type: Publication
  • Source Agency: University of New South Wales
  • Files: TRIS
  • Created Date: Feb 23 1977 12:00AM