The Behavior of a Firm Subject to Stochastic Regulatory Review: Comment
Volume: Volume 5, No. 2
Issue: Autumn 1974
Pages: pp. 710-712
Authors: William T. Ziemba
Title: The Behavior of a Firm Subject to Stochastic Regulatory Review: Comment
Abstract: In his analysis of the behavior of a firm subject to stochastic regulatory review in an earlier issue of this Journal, Klevorick uses some "well-known results" concerning the strict concavity of composite functions to prove the unique existence of the firm's optimal research and investment levels in each period. Unfortunately some of these "well-known results" are not generally correct. Hence the proof of Theorem 2 is incorrect as stated. See Klevorick's accompanying reply for his corrections of the proof.
JEL Classification
Regulation of Public Utilities (6130)
Microeconomics Theory of Firm and Industry under Imperfectly Competitive Market Structures (0226)