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Comportement de l'entreprise réglementée: étude de l'hypothèse Averch-Johnson
[Behavior of the Regulated Firm: A Study of the Averch-Johnson Hypothesis]

The Averch-Johnson hypothesis of over-capitalisation is tested, in this work, using Bell Canada data from the 1952-76 period. The cost minimization conditions are checked by using a Cobb-Douglas production function, with an optional index of technology, while the 1952-76 data sample has been segmented into 8 sub-periods, to check for the influence of the random nature of any given sample. The main results of this paper are, first of all, that the Cobb-Douglas production function provides, overall, a satisfactory description of the production decisions of the firm, showing constant returns to scale in 83 % of the case. Secondly, 11 out of the 13 Student-t tests reject the hypothesis that the firm was minimizing its costs. In all cases, the results indicate that the bias favored the production factor (K). Finally, the most dramatic variations in the results come from the use of segmented periods. The Averch-Johnson hypothesis of over-capitalisation is tested, in this paper, using Bell Canada data from the 1952-76 period. The cost minimization conditions are checked by using a Cobb-Douglas production function, with an optional index of technology, while the 1952-76 data sample has been segmented into 8 sub-periods, to check for the influence of the random nature of any given sample. The main results of this paper are, first of all, that the Cobb-Douglas production function provides, overall, a satisfactory description of the production decisions of the firm, showing constant returns to scale in 83 % of the case. Secondly, 11 out of the 13 Student-t tests reject the hypothesis that the firm was minimizing its costs. In all cases, the results indicate that the bias favored the production factor (K). Finally, the most dramatic variations in the results come from the use of segmented periods.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 27669.

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Date of creation: 17 Jul 1980
Date of revision: 1982
Publication status: Published in University Microfilms International, University of Michigan 1457.DA82(1982): pp. 1-247
Handle: RePEc:pra:mprapa:27669
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