Two Theorems on a Justification of the Multiservice Regulated Company

Irwin W. Sandberg

Bell Journal of Economics, 1975, vol. 6, issue 1, 346-356

Abstract: This paper directs attention to limitations in linear cost-function models of a multiservice regulated firm. Such models may be used in attempts to determine a "subsidy-free" price structure. Assuming a wide variety of multifirm alternative market structures in which each firm is not necessarily regulated, the paper shows that a single regulated firm's providing all services is always more socially desirable. This is true in the sense that there is a vector of prices which satisfies the regulatory constraint and corresponds for each service to both a lower price and a target quantity of service consumed.

Date: 1975
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