In models of a multiproduct firm with increasing returns to scale, prices are not set equal to marginal costs. Ramsey prices, which are inversely proportional to the elasticity of demand when demands are independent, are usually used in this situation. An analogous pricing system has been...

After reviewing some recent developments in the airline industry, this article tests two hypotheses that were central to the argument for deregulation: (1) that CAB regulation caused airlines to employ excess capacity relative to the capacity that would be provided under unregulated competition;...

This article examines the optimal strategy for a regulator who seeks to maximize expected consumers' surplus and who faces some uncertainty about the technological capabilities of the firm being regulated. It is shown that the optimal strategy will generally induce the firm to adopt a cost...

The optimal regulatory strategy to promote research and development aimed at cost reduction is derived for an environment in which the firm's information about the technology of cost reduction, although initially imperfect, is better than that of the regulator. The manner in which the optimal...

The regulatory mechanism proposed by Vogelsang and Finsinger (V-F) will induce the regulated firm to adopt behavior other than myopic profit maximization. Pure waste, inefficient factor utilization, excessive research and development, and overinvestment in demand-increasing expenditures may be...