Regulation and cost inefficiency

The well known Averch Johnson effect states that rate-of-return regulation will induce cost inefficient production. This paper examines regulation induced inefficiency in broad set of environments including arbitrary regulatory mechanisms, multiple outputs/inputs, uncertainty, time dynamics, price discrimination, and more. I show that the Averch Johnson effect applies throughout a wide variety of settings. Despite the generality of framework, my analysis is truly elementary and does not rely on Kuhn-Tucker analysis or three dimensional graphics. I also provide results and discussion which clarifies the limits to Averch and Johnson-like insights in practical applications.