Considered the cutting edge of microeconomic theory in the 1970s,
natural monopoly research remains an active and fertile field. Policy
makers and regulators have begun to implement entry and pricing policies
that are based on theoretical and empirical analyses. This book develops
a comprehensive framework for analyzing natural monopoly. The authors
first present a historical overview of regulatory economics, followed by
analyses of optimal pricing and investment for single- and multiproduct
natural monopolies. Topics covered include cost and demand structures,
efficiency impacts of linear and multipart pricing, peak-load pricing,
capacity determination, and the sustainability of natural monopolies.
After a survey and analysis of natural monopoly regulation in practice,
the links between technological change and regulation are identified.
The book concludes with a discussion of the alternatives to traditional
regulation, including public ownership, franchise schemes, quality
regulation, and new incentive systems. Throughout the book, issues from
the telecommunications and energy industries are used to illustrate key
points. Its integrated framework will make it useful to academic
economists, regulatory analysts, business researchers, and advanced
students of public utility economics.