The Behavior of a Firm Subject to Stochastic Regulatory Review: Comment

William T. Ziemba

Bell Journal of Economics, 1974, vol. 5, issue 2, 710-712

Abstract: In his analysis of the behavior of a firm subject to stochastic regulatory review in an earlier issue of this Journal, Klevorick uses some "well-known results" concerning the strict concavity of composite functions to prove the unique existence of the firm's optimal research and investment levels in each period. Unfortunately some of these "well-known results" are not generally correct. Hence the proof of Theorem 2 is incorrect as stated. See Klevorick's accompanying reply for his corrections of the proof.

Date: 1974
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