Regulation of Natural Monopolies and the Fair Rate of Return

Hayne Leland

Bell Journal of Economics, 1974, vol. 5, issue 1, 3-15

Abstract: Defining "fair return" when profits are random has been a central problem in the theory of regulation. In this paper, we develop a simple but general concept of fair return based on an equilibrium model of production under uncertainty. We propose regulatory behavior which will induce firms to make efficient input choices, while at the same time guaranteeing fair returns.

Date: 1974
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