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Reconsideration of Averch-Johnson Argument

Author

Listed:
  • Seiichi Katayama

    (Kobe University)

  • Fumio Abe

    (Kagawa University)

Abstract

The purpose of this paper is to reconsider the essence of Averch-Johnson (A-J) argument. We show that the critical points in the argument are firstly how to choose variable adjusting to the regulatory constraint, and how the level of regulation is assigned. If the so-called A-J effect of overcapitalization is an essence of the regulatory constraint argument, a simple one factor model is enough to show it in a static model. However in a simple dynamic model, overcapitalization is not necessarily true with some form of adjustment method.

Suggested Citation

  • Seiichi Katayama & Fumio Abe, 1997. "Reconsideration of Averch-Johnson Argument," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 41, pages 25-39, February.
    • Handle: RePEc:kob:review:feb1997::v:41:p:25-39
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    More about this item

    Keywords

    Rate of return regulation; Averch-Jphnson effect; Overcapitalization;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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