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Resource Allocation and the Regulated Firm: A Reply to Bailey and Malone

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  • Noel M. Edelson

Abstract

In their recent article, Elizabeth Bailey and John Malone deduce the optimal capital-labor ratios for firms with four different management objectives (maximum profit, return on investment, sales, and output), given that these firms are subject to four types of regulatory constraint (profit no greater than a fair return on investment, on cost, on output, and profit no greater than some absolute upper bound). This note points out some flaws in their analysis, and derives the correct results by more elementary methods.

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  • Noel M. Edelson, 1971. "Resource Allocation and the Regulated Firm: A Reply to Bailey and Malone," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 374-378, Spring.
    • Handle: RePEc:rje:bellje:v:2:y:1971:i:spring:p:374-378
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    Cited by:

    1. Mirucki, Jean, 1980. "Vérification des conditions d'efficacité dans la production chez Bell Canada [Checking the conditions of efficient production in Bell Canada]," MPRA Paper 30147, University Library of Munich, Germany, revised Jun 1980.
    2. Milton Russell & Robert Shelton, 1974. "A model of regulatory agency behavior," Public Choice, Springer, vol. 20(1), pages 47-62, December.
    3. Mirucki, Jean, 1980. "Comportement de l'entreprise réglementée: étude de l'hypothèse Averch-Johnson [Behavior of the Regulated Firm: A Study of the Averch-Johnson Hypothesis]," MPRA Paper 27669, University Library of Munich, Germany, revised 1982.

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