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THE EFFECT OF COMPETITION ON CAPACITY UTILIZATION IN THE ELECTRIC UTILITY INDUSTRY
Author(s) -
PRIMEAUX WALTER J.
Publication year - 1978
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1978.tb00284.x
Subject(s) - duopoly , monopoly , economics , capacity utilization , microeconomics , competition (biology) , outcome (game theory) , industrial organization , set (abstract data type) , electric utility , cournot competition , ecology , computer science , programming language , biology , chemistry
Theory predicts that the combined capacity of two competing utility firms will be greater than the market requires and excess capacity will result. This study tested a set of monopoly and a set of duopoly electric utility firms and found that the outcome predicted by theory did not occur. Even though the duopoly firms did face more downward pressure on capacity utilization than the monopoly firms, the difference was not statistically significant. These results reveal that public policy decisions, predicated upon assumptions that combined capacity of two competing electric firms would be greater than the market requires, should be re‐examined.