Cost-Oriented Models of Network Industries Price Regulation

Summary

The existence of pure monopoly in network industries increases the role of regulation mechanisms in connection with objectification and increase in their social effectiveness. The objective of regulation mechanisms is to find an appropriate proportion between price and product supply of network industry under assumption of the existence competitive market. With regard to analysis of equilibrium in network industries models it is important to point out that except for competition policy protection the state fulfils another specific task - regulation of network industries. The aim of the paper is to examine the equilibrium conditions in the market of network industries. The state inuences proportional relations between price and supply of network industry production. The conditions for equilibrium of network industries and methods of their regulations will be examined in the paper. The stress will be laid on the regulation on the base of cost - return over costs regulation