Reexamination of the A-J effect
We establish four necessary and sufficient conditions for the existence of the Averch-Johnson effect in a generalized version of their famous model of the rate-of-return regulated firm. The four necessary and sufficient conditions are then compared to the two stronger sufficient conditions for the Averch-Johnson effect found in the literature. Our analysis also permits us to put to rest a somewhat protracted debate about the very existence of the Averch-Johnson effect.
Volume (Year): 12 (2002)
Issue (Month): 10 ()
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- El-Hodiri, Mohamed & Takayama, Akira, 1973. "Behavior of the Firm Under Regulatory Constraint: Clarifications," American Economic Review, American Economic Association, vol. 63(1), pages 235-37, March.
- Zajac, E. E., 1972. "Lagrange multiplier values at constrained optima," Journal of Economic Theory, Elsevier, vol. 4(2), pages 125-131, April.
- Takayama, Akira, 1969. "Behavior of the Firm under Regulatory Constraint," American Economic Review, American Economic Association, vol. 59(3), pages 255-60, June.
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