Skip to main content
Log in

Natural monopoly revisited

  • Original Article
  • Published:
Journal of Regulatory Economics Aims and scope Submit manuscript


We study the conditions under which production processes exhibit a decreasing average cost function in the absence of perfectly competitive input markets and discuss some implications for regulatory policy.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others


  1. See, e.g., Kreps (2004, pp. 219–220) and Serrano and Feldman (2013, pp. 152–155).

  2. The case of Amazon is detailed in Khan (2016). See also the empirical analysis in Azar et al. (2022), which shows that “[g]iven high concentration, mergers of employers have the potential to significantly increase labor market power.” Naidu et al. (2018 pp. 546–547) survey empirical literature suggesting that “industry consolidation has given employers greater bargaining power in labor markets.”

  3. The essence of the argument that follows also applies to the case of ‘land.’

  4. The Lerner index of a firm’s market power (Lerner, 1934) can be expressed solely in terms of the firm-level price elasticity of demand.

  5. A downward sloping \({\textit{MR}}(\cdot )\) function is sufficient but not necessary for the elasticity of the cost function with respect to k to be greater than one.

  6. Note that we are adopting a “long-run” perspective, since no input is fixed over the underlying time horizon.

  7. See, e.g., Joskow (2007) for a survey.

  8. See, e.g., U.S. Department of Justice (1968, 1982, 1984, 1992, 1997, 2023), Williamson (1968), Muris (1980), Fisher and Lande (1983), Werden (1997), Kolasky and Dick (2003), and Coate and Andrew (2009).

  9. See, e.g., Azar et al. (2019).


Download references

Author information

Authors and Affiliations



OCN wrote the entire article.

Corresponding author

Correspondence to Oriol Carbonell-Nicolau.

Ethics declarations

Competing interests

The authors declare no competing interests.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Valuable comments from an anonymous referee and the editor are gratefully acknowledged.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Carbonell-Nicolau, O. Natural monopoly revisited. J Regul Econ (2024).

Download citation

  • Accepted:

  • Published:

  • DOI:


JEL Classification