Although many economic and business historians have examined how American railroads colluded to raise rates or limit service, they have paid less attention to the many ways railroads cooperated to exchange cars and freight between companies and build needed interconnections. This article...

We consider a model featuring a single-product natural monopoly, which faces evaders, i.e., individuals that may not pay the price. By exerting a costly effort, the firm can deter evasion. To maximize the total surplus, a regulator sets the price, the level of deterrence effort, and socially...

The underlying concept of a “natural” monopoly is that costs for a given output are minimized when one firm produces that output. This paper shows that a paradox arises for certain infrastructure and delivery products satisfying widely accepted technical criteria for such monopolies: Under...

We consider the regulation of a monopoly facing consumers that may evade payments, an important issue in public utilities. To maximize total surplus, the regulator sets the price and socially costly transfers, ensuring that the monopoly breaks-even. With costly effort, the firm can deter...

This Article advances a novel theoretical model for assessing policy interventions against Facebook. As prosecutors barrel forward against digital platforms, soon it will fall upon courts and, eventually, regulators to devise remedies. We argue that any sensible solution must include...

The family of optimization models of Data Envelopment Analysis (DEA) has been shown to be very useful performance analytics tools that support benchmarking systems in measuring, comparing, and enhancing various notations of efficiency. It has also been extensively used as an advanced analytical...

Adverse selection is a classic market failure known to limit or "unravel"' trade in high-quality insurance and many other economic settings. While the standard theory emphasizes quality distortions, we argue that selection has another big-picture implication: it unravels competition among...

We generalize the War of Attrition model to allow for N + K firms competing for N prizes. Two special cases are of particular interest. First, if firms continue to pay their full costs after dropping out (as in a standard-setting context), each firm's exit time is independent both of K and of...

There are many industries in which potentially competitive segments require services provided by natural monopoly bottlenecks (essential facilities). Since it is difficult to regulate these facilities, developing countries are using Demsetz auctions, where the facility is awarded to the firm...

Why do governments seek restrictions on the use of export subsidies through reciprocal trade agreements such as GATT? With existing arguments, it is possible to understand GATT's restrictions on export subsidies as representing an inefficient victory of the interests of exporting governments...

The transition of Hong Kong's main economic activities from manufacturing to services is accompanied by gradual changes in the regulatory regimes for monopolies. The local telecommunication services industry has been liberalized, deregulation of public transport is taking shape, and the schemes...

This paper considers the efficiency of a contestable natural monopoly if consumers are heterogeneous and the monopolist can differentiate prices imperfectly. With restricted entry, the standard result in this case is that the monopoly offers a menu of price-quantity combinations which leads to...

Transportation networks, such as railways, roads and highways provide standard examples of natural monopolies. Since the introduction of the term “natural monopoly” by T. Malthus in 1815, this concept has been defined in different ways by several authors (F. Bastiat, J. S. Mill or L....

In the first decades of the twenty-first century – more than 150 years after the earliest franchise contracts were negotiated between Canadian governments and privately owned utility companies, and 30 years after the Economic Council of Canada published John R. Baldwin’s "Regulatory Failure...

The conception of “economies of scale” in the conventional production era led to the proliferation of natural monopolies, as if demand for certain needs and products could only be sufficiently met by colossal entities. The most efficient method for achieving higher production capacities,...

We consider a shared ownership arrangement among consumers/owners as a means to organize production with an underlying decreasing average cost function typical of natural monopolies. The resulting output allocation yields a lower deadweight loss than the monopoly allocation, and is, in some...

This paper explores the implications of asymmetric cost information within the context of a regulated natural monopoly. We provide a unifying framework for the analysis of "cost padding" and/or exaggeration, both of which we refer to simply as "misreporting of costs." We study the incentives...

"Regulatory Failure and Renewal develops a framework to understand the choice of regulatory instrument used in Canada for natural monopolies such as telephone companies, water utilities, streetcars, hydroelectricity, and railways from the 1880s to the 1930s. Using the transaction-cost literature...

Many markets rely on information intermediation to sustain cooperation between large communities. We identify a key trade-off in costly information intermediation: intermediaries can create trust by incentivizing information exchange, but with too much information acquisition, intermediation...

This paper disproves both the “natural” and the “monopoly” parts of natural monopoly. It then proves that decreasing average cost is not an advantage at all, but is merely a shameless excuse of asking for protection and bailout

In this paper, we show that information trade has similar characteristics to a natural monopoly, where competition may be detrimental to efficiency due either to the duplication of direct costs or the slowing down of information dissemination. We present a model with two large populations in...

We develop a model of vertical innovation in which firms incur a market entry cost and choose a unique level of quality. Once established, firms compete for market shares, selling to consumers with heterogeneous tastes for quality. The equilibrium of the pricing game exists and is unique within...

I examine the effects of privatization, in the form of acquisitions, in the Swedish electricity distribution sector. As the majority of the distribution networks remained publicly owned, I use a synthetic control method to identify the effects on price and labor efficiency. In comparison to...

Using data from the International Benchmarking NETwork database, the authors estimate measures of density and scale economies in the water industry in four countries (Brazil, Colombia, Moldova, and Vietnam) that differ substantially in economic development, piped water and sewerage coverage, and...

This paper reviews and evaluates some of the reasons commonly advanced to explain why the production of money is a natural monopoly. Some these reasons are actually not strict natural monopoly explanations but are instead claims that the production or use of money involves some type of...

This paper shows with a formal model that under monopoly regulation, OPEX-risk can be a source for a CAPEX-bias. If OPEX and CAPEX are substitutes, the regulated firm can reduce the risk of the firm and thereby reduce the true cost of capital by rebalancing OPEX and CAPEX. If the allowed...