The 'Optimal' Fair Rate of Return

A rather extensive literature has developed that analyzes the behavior of the profit-maximizing regulated firm using the model introduced by H. Averch and L.L. Johnson (A-J). Taking the value of the fair rate of return as exogenously given, this set of papers has provided a rather complete and detailed analysis of the (absolute and relative) input levels chosen by such a regulated firm and the quantity of output produced by the company.