RATE OF RETURN REGULATION UNDER COURNOT OLIGOPOLY

Abstract

ABSTRACT

This paper proposes two alternative extensions to the direct methods of fair rate of return regulation. First, is by imposing a rate of return (ROR) constraint on a simple symmetric Cournot oligopoly model as the first alternative extension. The second alternative model is one of a two-stage duopoly output game. The main objective in undertaking this theoretical study of industrial organization is to see that the "over capitalization" result holds not only in the monopoly framework, but also in the extended Cournot oligopoly, be it a one-stage game or a two-stage game.

JEL Classification: C610, D210, D430, L130, L590