An alternative way of determining the range of Averch and Johnson's Lagrange multiplier: a note

Abstract

In this note, an alternative method is developed for determining the range of values assumed by the Lagrange multiplier of Averch and Johnson's constrained maximization problem. By assuming that the regulated firm's profit function is single-peaked, the approach is rather general.

Acknowledgements

We are grateful to Bernd Engelmann, Klaus Zauner, and many other colleagues for their helpful comments. The usual caveat applies.