Rate Of Return Regulation: An Indirect Approach
AbstractThis paper proposes an indirect method to the "Rate of Return Regulation" (ROR) or "Cost Based Regulation," by imposing ROR on monopoly firms through tax instruments, i.e., ad-valorem tax and consumption tax. The main objective in undertaking this theoretical study of industrial economics is to investigate and compare the results of direct with indirect methods concerning the social cost of monopoly and monopoly distortions or "overcapitalization." The finding shows that the indirect method not only would not involve an inefficient allocation of resources but it is also much more demanding than the direct method in terms of government's information requirements and even increases the monopoly output higher than the level reached by direct regulation. This is relevant in the implementation of regulated firms especially in the period after privatization.
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Bibliographic InfoArticle provided by IIUM Journal of Economis and Management in its journal IIUM Journal of Economics and Management.
Volume (Year): 7 (1999)
Issue (Month): 2 (December)
Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
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