In this article, we model regulation as a repeated game between a utility facing a random sequence of demands and a regulator tempted to underreward past investment. Rate-of-return regulation designed with a constitutional commitment to an adequate rate of return on capital prudently invested is...

In markets with increasing returns to scale in investment, competition will occur over both the amount and the timing of new capital construction. This article develops a theory of competition in markets with indivisible and irreversible investments. The consequences of competition depend on the...

We examine investment by firms in 24 chemical product industries to determine whether firms invest preemptively to achieve persistent increases in market share or whether there is evidence of behavior to maintain market share. The data indicate that investment reduces the probability that rival...

Committing to prices that result in rationing may be more profitable than setting market-clearing prices if customers must make sunk investments to enter the market. Rationing is ex post inefficient, but it gives more surplus to lower-value customers who are the marginal consumers the...

Optimal regulation, subject to informational constraints, is analyzed for industries for which production requires complementary inputs. An issue for regulatory policy is whether supply in these industries should be "bundled" or "unbundled." Bundled supply calls for regulation of an integrated...

In providing rewards to innovators, there is a tradeoff between patent length and breadth. This article provides conditions under which the optimal patent policy involves infinitely-lived patents, with patent breadth adjusting to provide the required reward for innovation.

Whether transmission contracts increase or mitigate market power depends crucially on the allocation of transmission rights. In an efficiently arbitraged uniform-price auction, generators will only obtain contracts that mitigate their market power. Contracts inherited or bought in a "pay-as-bid"...