FACTOR DEMANDS, COST-FUNCTIONS, AND TECHNOLOGY MEASUREMENTS FOR REGULATED FIRMS

In this paper we provide some missing elements to the theory of the re gulated firm and discuss implications for econometric specification. P articular attention is paid to situations where capital is quasi-fixed under rate-of-return regulation, which may lead to serious specificat ion and interpretation errors if the current theoretical basis is not adjusted. We also extend the analysis to arbitrary types of regulation and indicate precisely how the differential of factor demands can be specified and what regularity conditions it must satisfy. The exact fo rmula for the calculation of marginal products, returns to scale, and technological change are derived.